For Cristian Maggio, London-based head of emerging-markets research at Toronto Dominion Bank, a slide in developing-nation assets may not be over.
Emerging-market stocks dropped the most in four years in the third quarter, while local-currency sovereign bonds retreated 3.4 percent. Brazil’s real tumbled to a record low in September as the nation’s credit rating was cut to junk by Standard & Poor’s.
“Longer-term, we still see fundamental reasons for weakness,” said Maggio. “The selloff looks overdone, and I expect this extreme pessimism to correct somewhat in the near term. But markets will have to believe that the selloff of emerging market currencies has gone too far. Poor sentiment and panic selling can be self-fulfilling.”