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Nomura today announces the launch of its flagship Global Emerging Market Risk Index, GEMaRI, an early warning system for emerging market currency and balance-of-payments crises.
GEMaRI calculates the risk of currency crises occurring in 35 emerging market economies over the following 12 months and assigns a score to each country. The index incorporates 16 specially selected and weighted indicators which are integral to accurately measuring the risk of a currency crisis in an emerging market economy.
Paul Sheard, Nomura’s Global Chief Economist based in New York, said “Nomura’s GEMaRI is a truly global and co-operative research effort, incorporating economists and strategists based in London, New York, Hong Kong, Singapore and Mumbai. It is a simple yet powerful tool which represents the realisation of a major research project carried out by Nomura’s global network of analysts over the past 12 months.”
Simon Flint, Nomura’s Global Head of Foreign Exchange Research based in Singapore, notes “GEMaRI harnesses the intellectual prowess of Nomura’s global experts and will deliver tangible value to a wide range of investors. It offers a systematic, objective and consistent rules-based approach which makes it easy for the market to compare the risk of financial crises across countries and over time.”
GEMaRI has been rigorously back tested using data from 1996 incorporating previous major financial crises in emerging market economies, including the Asia crisis in the late 1990s and more recently the currency stresses in Eastern Europe. In addition to assessing the risk of balance of payments shocks and exchange rate crises in emerging markets, GEMaRI can also be deployed to gauge equity risk premia and to spot inconsistencies in sovereign credit ratings and credit default swaps.
Commenting on the results of the inaugural GEMaRI study, Peter Attard Montalto, Co-ordinator of GEMaRI and an Emerging Market Economist based in London said “While emerging markets have gained the attention of investors this year, the top line results in our debut GEMaRI research show that a wide disparity of vulnerability still exists. With investors increasingly likely to be looking at cross country economic comparisons in 2010 we hope GEMaRI will become an important part of our client’s trade idea generation.”
Please follow the attached link to the full initiation report including information detailing how the index is constructed:
