A painful reminder for investors – emerging markets are risky

Emerging market stocks have gone from trading at a discount to their developed market peers to trading at a premium as investors chase growth. But as the case of Chinese timber group Sino Forest proves, the emerging market discount existed for a very good reason, says Merryn Somerset Webb.

This week, I've been looking at yet another chart. This one comes from Jonathan Allum at Mizuho Securities and shows the prices of two Asian shares, both of which have fallen by 80% so far this year.

Of the two collapses, the first, Tepco, is pretty easily explained. This is the Japanese company that supplies electricity to the Tokyo area from various thermal and nuclear power stations including the Fukushima plant hit by an earthquake in March. The reason for its plummeting share price is therefore, as Allum puts it "deeply regrettable, but clear."

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Merryn Somerset Webb

Merryn Somerset Webb started her career in Tokyo at public broadcaster NHK before becoming a Japanese equity broker at what was then Warburgs. She went on to work at SBC and UBS without moving from her desk in Kamiyacho (it was the age of mergers).

After five years in Japan she returned to work in the UK at Paribas. This soon became BNP Paribas. Again, no desk move was required. On leaving the City, Merryn helped The Week magazine with its City pages before becoming the launch editor of MoneyWeek in 2000 and taking on columns first in the Sunday Times and then in 2009 in the Financial Times

Twenty years on, MoneyWeek is the best-selling financial magazine in the UK. Merryn was its Editor in Chief until 2022. She is now a senior columnist at Bloomberg and host of the Merryn Talks Money podcast -  but still writes for Moneyweek monthly. 

Merryn is also is a non executive director of two investment trusts – BlackRock Throgmorton, and the Murray Income Investment Trust.