Archive for June, 2013

WSJ: Are Emerging Markets Oversold

Stephen Jen, managing partner at SLJ Macro Partners LLC, has an ominous message: “Mind the falling BRICs,” he wrote Monday, referring to Brazil, Russia, India and China–once the darlings of the investment world.

He said the growth of emerging markets in recent years has been over-dependent on cheap liquidity. Now that is drying up, emerging markets’ wobbly bits will be all the more visible. “The cumulative capital inflows in the past decade have been huge, driven by questionable rationale. The risks of a ‘sudden stop’ in capital inflows were very high and rising. While the economic fundamentals of the developed economies have indeed been bad, the economic fundamentals of many emerging-market countries were not nearly as good as many presumed.”

Read the original article on the ‘Wall Street Journal’ website.

Bloomberg: Emerging Markets Crack as $3.9 Trillion Funds Unwind: Currencies

“These are pre-quake tremors: something big is coming,” Stephen Jen, the co-founder of hedge fund SLJ Macro Partners LLP, said in a phone interview from London on June 12. “There’s tremendous deceleration in emerging markets. You may see crisis-like price actions without having a crisis.”

Read the original article on the ‘Bloomberg’ website.

The Economist: The end of the affair

Is this a panic or something more serious? Emerging-market currencies have endured the occasional bad month only to bounce back. The Fed is likely to tread carefully. But even a slow, steady rise in Treasury yields and a shallow dollar rally would spell trouble. Around $4 trillion has washed into emerging markets since 2009, according to Stephen Jen of SLJ Macro Partners, a hedge fund. Much of that has been “pushed” abroad by the low yields on offer in the rich world rather than “pulled” by the prospect of superior returns, says Mr Jen. If only a fraction of that capital is yanked out by jittery investors it would turn a sell-off into a rout.

Read the original article on the ‘Economist’ website.

Bloomberg: Fed Taper Fear Stalks World Financial Markets: Cutting Research

Any tapering in the Fed’s $85 billion-a-month asset-purchasing program will hurt economies in Europe and Asia, where the focus remains on loose monetary policy, Stephen L. Jen and Joana Freire of London-based hedge fund SLJ Macro Partners LLP wrote in a June 10 report. This decoupling would particularly strike emerging markets, which previously served as magnets for capital as the Fed kept monetary policy looser than their central banks did.

“The Fed devises policies for the sole benefit of the U.S.,” according to Freire and Jen, a former International Monetary Fund economist who also has worked at the Fed. “Just as it did not show much care about the possible negative side effects of its quantitative easing operations, when the time comes for the Fed to start tapering, it will not likely care about the negative side effects on the rest of the world.”

Read the original article on the ‘Bloomberg’ website.

WSJ: Aussie Dollar Faces “Grave Danger”

In the view of Stephen Jen, a partner at London-based SLJ Macro Partners, the Aussie dollar ranks alongside emerging market currencies as being in “grave danger” of a big correction lower.

“If China decelerates, the ‘truth will be revealed,’” he says in a note to clients.

Read the original article on the ‘Wall Street Journal’ website.