Goldman Sachs Group Inc. is reducing its exposure to emerging markets as turmoil in global credit markets risks triggers a correction in Latin America, Eastern Europe and parts of Asia, the Daily Telegraph reported on its Web site Sunday.
Citing a series of client notes issued recently, the Telegraph reported that Goldman Sachs has advised cashing in profits as a precautionary “near-term” measure. Goldman Sachs has previously led the charge into the frontier economies, coining the term ‘BRIC’ for the quartet of Brazil, Russia, India and China. However, it has closed its positions on Brazilian and Mexican stocks after selling off in the latest rally, hoping to buy back later, the Telegraph reported. “We see ongoing vulnerability. As the August pullbacks showed, the market could easily begin to worry more about the transmission of the latest financial problems to US and global growth. While contamination to emerging market equities in that episode proved short-lived, it was painful. We think it is prudent to book a gain,” Goldman Sachs said.
The US investment bank said Brazil’s real is 28% overvalued against the US dollar, as are the currencies of India, at 22%; South Korea, 32%; Hungary 42%; Poland, 60%; and Turkey, 74%, according to the report. Goldman added, however, it was still “very bullish” on the emerging markets in the longer term, but warned that investors need to pick and choose at this stage, the Telegraph reported. (marketwatch)