El-Erian Says Emerging Markets Will Fall Until Prices Become Attractive

Allianz’s chief economic advisor, Mohamed El-Erian, said Monday the selloff will continue until one of two things happen: emerging markets put in place a policy circuit breaker or prices fall low enough to bring buyers back.
How low?

“Low enough means a lot lower than here because they’ve been inflated well beyond fundamentals by central bank policies, so in order to bring people back in you’ve got to overshoot the fundamentals on the down side to induce people back in,” he told CNBC’s “Squawk Box.”

“We are still well above what would be warranted by fundamentals. There has been this enormous faith in central banks, and that faith in central banks means we have borrowed returns and growth from the future, hoping that central banks will be able to hand off to higher growth. That has not happened.”

via CNBC

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza