ING Investment Management (ING IM) has reduced its exposure to emerging market assets, partly due to concerns about debt.
The debt is sourced mainly from the developed world and improvements in developed economies makes the emerging markets vulnerable.
Broadly, macro policies are not managing to improve current accounts in the most negative countries, says the firm.
The reduced exposure covers equities, bonds and currencies.
On fixed income, Valentijn van Nieuwenhuijzen, head of strategy, says: “So far, the rising external financing requirements of emerging markets have been met by strong portfolio investment flows into debt instruments. With foreign direct investment and equity flows clearly lower than the averages of the past five or ten years, the financing of the larger emerging market current account deficits has relied primarily on debt flows.
“We are getting increasingly worried about this because the improving situation in the developed world will have a negative impact on flows from developed into emerging markets, and also because of poor macro policies in some of the key emerging market countries.”
ING IM is particularly concerned about India, Indonesia, South Africa and Turkey.
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