Can Emerging Markets Survive the End of Quantitative Easing?
Emerging markets are getting dumped by investors once more, as currencies continue to free fall, and bond yields spike in many of the world’s important developing economies.
A swath of currencies headlined by the Indian rupee are being shunned by investors, as the dollar is looking more lucrative in the wake of weak economic conditions in much of the developing world, and also the prospect of quantitative easing ending.
Recent Federal Reserve minutes indicate that the central bank’s asset purchasing program could be close to done, as sometime this fall the bank will likely slow the rate of purchases en route to an end in 2014. The easy liquidity provided by the bank has made its way into the nooks and crannies of the world’s market, and economies like Brazil, India, and others have been greatly appreciative of the liberal investments resulting from it. However, that’s not going to last forever, and markets are getting shaky.
Maarten-Jan Bakkum, investment strategist for ING Investment Management’s emerging market funds, told Reuters that, “U.S. yields will go higher―that is obvious―and no one wants to be exposed to assets in emerging markets which are very sensitive to U.S. monetary policy.”