Greek-EU Agreement Lifts Emerging Market Stocks

Prime Minister of Greece Alexis Tsipras in 2012 from Wikipedia

Prime Minister of Greece Alexis Tsipras in 2012 from Wikipedia

The agreement between Greece and its European Union creditors which was finalized recently has spurred demand for riskier investments, causing a rally in emerging-market stocks. Also influencing the uptick in emerging stock prices is data from China showing their economy stabilizing.

Prime Minister Alexis Tsipras of Greece emerged after 17 hours of negotiations with his country’s European creditors with a deal which will include the recapitalization of Greek of banks.

The MSCI Emerging Markets Index surged 4.3 percent over three days, reaching 943.01. It was the biggest three-day gain so far this year.

Since the agreement with the EU and Greece lowered the chance that Greece will leave the European currency union, it is believed that outflows from developing nations will be held in check. Investors took over $1.1 billion out of US-based ETFs that were invested in emerging markets, for the second week in a row, causing the worst run on this market since December 2014.

“If things calm down in Greece, investors are more willing to invest in riskier places, like emerging markets,” said Hertta Alava, the Helsinki-based FIM Asset Management Ltd head of emerging markets. She added that the apparent stabilization of the Chinese economy is also having an effect on the emerging markets sector.

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