\nparallels between the current emerging market correction and a
\ntwo-month drop in the MSCI EM index of 11% in 2004, that was followed
\nby a 26% rally through the end of 2004. <\/p>\n
If a similar rally is to take place this time around, it will likely go hand in hand with a rebound in U.S. stocks, he said, noting a daily
\ncorrelation between MSCI EM and MSCI US at .9379, <\/p>\n
"[That's] very high but down
\nfrom a peak of around .9800 at the beginning of 2009 and again in late
\n2009," he wrote. "That correlation has broken down from time
\nto time during the financial crisis, but always seems to rise again
\nback towards 1. <\/p>\n
Recent monetary tightening in China and India has helped hinder world stock markets, with the MSCI Emerging Market Index is down 13% from its peak Jan 11, compared to a drop of 7% in U.S. stocks and a 9% fall for developed markets as a whole. However, it does not appear to be slowing overall economic growth in emerging markets the way many investors have anticipated.<\/p>\n
Following a 75 basis point rate hike in January, India still estimates that GDP growth for fiscal 2009\/10 ending Mar. 31, will hit 7.2%, up from 6.7% the year earlier. China, meanwhile, is still predicting growth of 10% this year despite recent tightening moves, including a planned increase in bank reserves. <\/p>\n
With the exception of Russia, whose economy is expected to grow a relatively weak 3.6% in 2010, most other emerging market countries, including Brazil are also expected to book strong growth. <\/p>\n
Ongoing concerns about inflation should result in further tightening in the developing region, but not enough to slam the brakes on projected growth, said Mr. Thin. <\/p>\n