Emerging economies: Turbulent markets in the suspect six

by / Friday, 04 September 2015 / Published in Economy

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EMERGING markets had another turbulent week. The MSCI EM stock index, comprising stocks from across the developing world, fell 3.2%. The JPMorgan Emerging Market Currency index was down 1.4%, dropping to its lowest level since the benchmark was created in 1999. Losses in equities and currencies across emerging markets have now reached what the Institute of International Finance (IIF), an industry association, calls “crisis proportions”.There are two main explanations for the recent sell-off. The first is a slowdown in economic growth. Since last year, the International Monetary Fund has cut its 2015 growth forecast for emerging markets from 5.3% to 4.3%. Reduced Chinese demand for iron ore, copper, soyabeans and other raw materials has weighed on commodity exporters, contributing to a drop-off in global trade. According to the Bureau for Economic Policy Analysis (CPB), the Dutch state's economic-forecasting agency, emerging market export volumes fell 3.3% in the first half of 2015.Expectations of interest rate hikes in America and Britain are another driver of emerging-market turmoil. In the years following the Great Recession, low interest rates and quantitative easing encouraged investors to seek out higher yields in riskier markets. As the Federal Reserve in …
Source: The Economy