Emerging market hedge funds gain in third quarter

HFRI Emerging Markets (Total) Index gained 5.06% in September quarter, led by regional markets such as Latin America, Russia and emerging Asia, and has gained 9.1% till October


The volatile LatAm market is chiefly responsible for these gains, with an year to date  gain of 33%. Photo: Bloomberg
The volatile LatAm market is chiefly responsible for these gains, with an year to date gain of 33%. Photo: Bloomberg

Emerging market (EM) hedge fund assets ended the September quarter with $199.66 billion, an increase of $9.8 billion over the preceding quarter, according to Hedge Fund Research (HFR).

This was mainly due to performance-based quarterly gains as funds faced a net outflow of $850 million.

The HFRI Emerging Markets (Total) Index gained by 5.06% in the September quarter, led by regional markets such as Latin America, Russia and emerging Asia, and has gained by 9.1% year to date (till October).

The volatile LatAm market is chiefly responsible for these gains, with an year to date gain of 33%. The HFRI India Index rose by 7.6% in the September quarter and is up 7.8% year to date.

Cash crunch may cause GDP growth to slip in FY17

Most economists appear to agree that the government’s currency switch will hurt economic growth in the second half.

Estimates vary between 50-100 basis points fall. However, Ambit Capital Pvt. Ltd expects it to be worse, predicting growth in the second half will slow down to 0.5% from 6.4% in the first half.

It expects a temporary hit on business due to a liquidity crunch, a structural hit to non-taxpaying businesses and after all this plays out, it sees a structural boost to taxpaying businesses over those in the informal sector who don’t.

Gross domestic product (GDP) growth is likely to be lower at 3.5% in FY17 and then improve to 5.8% in FY18.

IIP declines in first half, out of tune with reality?

The Index of Industrial Production (IIP) saw a marginal improvement in September, but fell 0.1% in the first half of 2017, marking the worst fiscal year first half since early 1990s.

According to report by brokerage firm Motilal Oswal Securities Ltd, this is in stark contrast to very strong growth of nearly 46.5% year-on-year in excise duty collection.

Since the government’s tax base is larger than the sample covered in IIP, it reflects that industrial activity in the economy may not be as weak as reflected by IIP, it added.

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