You know there’s an underlying problem when investment firms start to cut exposure to a particular asset class.
Goldman Sachs’ decision last week to slash exposure to emerging markets is an indication of the current situation for these economies. The bank’s asset management arm said it had scaled back its “overweight” exposure to emerging market currencies and debt amid rising trade tensions between the U.S. and China.
Emerging markets are bearing the brunt of an escalating trade war between the world’s two largest economies and there is no certainty on when this ends. Last week was the worst for emerging market currencies since the Turkish lira crisis of summer 2018. The Chinese yuan has lost nearly 3% of its value against the U.S. dollar since May 5 — the day President Donald Trump tweeted about new tariffs on the country.
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