MSCI emerging markets gauge rose 0.6 percent at 2:05 p.m.in Hong Kong. Nearly $600 billion of debt held by emerging market nonfinancial corporates is coming due next year, including nearly $300 billion of refinancing needs, according to the Institute of International Finance: With tighter lending conditions and corporate profits deteriorating, companies’ ability to refinance that existing debt will be limited, investors say.
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In a note published late on Wednesday, JPMorgan said that increasing dollar strength should be expected in 2016.
The broader backdrop of uncertainty caused by differing central bank policy paths globally is already working against emerging markets.
Forex Time Research Analyst Lukwan Otunuga said erratic movements continued to affect the currency markets as eager investors made the most of the incredible levels of volatility in the hope of being on the right side of one of the most anticipated financial events of 2015.
The prospect for higher borrowing costs in the US contributed to losses in emerging-market assets this year as lower commodity prices, weaker credit growth and a slowdown in China undermine growth in developing economies.
In fact, some analysts see the Fed’s announcement as a boon for emerging markets.
However the focus for markets was on the outlook for further rate hikes, with the Fed indicating it was likely to be “gradual”, and dependent on the rate of inflation.
But moves on major currency pairs were subdued ahead of a Fed decision at 1900 GMT, widely expected to deliver its first rate increase in almost a decade.
Yacov Arnopolin, an emerging-market investor at Goldman Sachs Asset Management, said he’s ready to “take advantage of a potential post-Fed knee-jerk sell-off” to add emerging-market assets.
Tokyo stocks rose in response to the Fed’s move, “creating a risk-on mood that drove traders to sell the yen, which is perceived as a relatively safe currency”, said Masayuki Hoshina, chief economist at Okasan Securities Co. “Inevitably, US tightening will produce some winners and losers among EM sovereigns, even though we believe the overall sector impact should be muted”.
“We have adjusted considerably in Brazil over the previous year or two given the twin deficits and political risk”.
While that initially hurt the dollar and led the euro to hit a session high of $1.10130, the dollar recovered as traders viewed the pace of rate hikes as hawkish overall.
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Turkey’s Borsa Istanbul jumped about 0.20 percent at the open, but then lost part of its gains by noon local time [1000GMT].
