Emerging Markets

July 28, 2014

By: Darren Viegas

No Love for Russia Stocks as Central Bank Hikes Rates
Summary: The Russian central bank has hiked its key interest rate 50 basis points from 7.5% to 8%. This comes amidst a steady decline in the MICEX (down 2.4% on the week) and a weak Russian Ruble on threat of European sanctions.
Commentary: The Chief analyst at Danske Bank said that this move ‘smells of desperation’, as Russia is currently in a recession and trying to stem a currency outflow with the ongoing political crisis due to the downed Malaysian airliner.

Five Emerging Markets to Buy Or Sell As Fed Tightens Policy
Summary: As major analysts from Goldman and JP Morgan have begun to predict a US rate hike for Q3 2015 on the terms of strong growth. Here is who the author thinks will benefit and who will suffer from a rate hike any why.
Benefit: India- Strong Economic track record from politicians (Modi) & Reduction of current account deficit
Mexico- Reforms to rejuvenate various economic sectors. Mexico will benefit from close proximity and cross border ties to US
Suffer: Turkey- Growth has been founded on low interest rates. Credit boom grip will hurt in the midst of a rate hike
Gulf States- Countries with currencies pegged to the dollar will suffer more according to past crises. Qatar and UAE will have a tough time in rate hike times.
Odd One Out: China- China has a large amount of debt, but the debt is local. China is currently managing an economic slowdown, but the author thinks the issues can be contained.

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