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EMERGING MARKETS WEEK has an upside bias but some investors hold judgment

A growing, but still fragile optimism in emerging markets will likely give emerging market bond asset prices some support in the coming weeks, but analysts say the good news may be short-lived.

The US Federal Reserve has acknowledge hat a mild recession is possible in the first half of 2008, at the same time while hinting at limited interest rate cuts. This does not bode well for emerging markets, which tend to rely on strong global economies to buy their value-added goods and high-priced commodities.

China booming economy remains a key perception and it that continues to underpin the emerging market world. If China starts to slow that may not be the case moving forward and it could very well be an important driver for valuations to correct.


MSCI eyes changes to it emerging markets index

MSCI Barra may be poised to make changes to its widely popular and followed indices that may see South Korea move to a developed-market status and possibly the inclusion of Kuwait, Qatar, and the United Arab Emirates (UAE)  in its emerging markets index, which would include bond index.

Howell the inclusion of the UAE, Kuwait, and possibly Qatar in MSCI emerging markets index would have a net positive impact on those stock markets and it could spur investors to scramble for additional exposure in them.

However, on the other side, a reclassification of South Korea and Taiwan may have a modestly negative impact on those markets as they move to being the “smaller” fish among the other developed markets.

MSCI said it is currently consulting with the International investment community on a January paper it put out on the reclassification of markets but declined to comment further.



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