Emerging markets are close to losing all their year-to-date gains

Investors' pessimism towards emerging markets is growing - now their index is very close to the levels of the beginning of the year, all the growth since January has been lost, writes Bloomberg.

The MSCI index, which tracks emerging markets, fell 0.4% on Thursday, marking its fifth day of decline and the longest losing streak in six months. In total, it has lost about 10% since its all-time high in February.

As Maitel Kotecha, chief emerging markets strategist for Asia and Europe at TD Securities, explains, rising US government bond yields and a stronger dollar have led investors to either shift to less risky assets or take profits from past growth in emerging markets stocks. According to his forecast, there are no signals for a reversal in the short term.

Bloomberg emphasizes that emerging markets are being pressured not so much by rising yields in the United States as by a wave of tightening monetary policy in many countries, such as Brazil and Russia. The rate hike raises concerns among investors that the rally in emerging market stocks can no longer continue.

• Emerging markets gave investors more than $5 trillion in 2020 - they grew strongly in the second half of the year. Then their growth was supported by an unprecedented US budget deficit, combined with aggressive monetary stimulus, which put pressure on the dollar and provided incentives for emerging economies. At the end of 2020, investors and traders polled by Bloomberg expected the markets to continue their strong growth in 2021.