4 September 2015
Brought to you by Investec Switzerland.
Emerging-market policy makers are set to confront their twin fears in person. The prospect of higher U.S. interest rates alongside the deepening slowdown and devaluation in China are chilling investor sentiment toward the onetime powerhouses of global growth, roiling currencies and leaving the MSCI emerging market index down more than 16 percent so far this year.
How to insulate the world economy will top the agenda of talks in Ankara this week as finance chiefs from the Group of 20 nations convene for the first time since August’s stock-market rout. They do so as the International Monetary Fund warns risks to the global economy are ‘‘tilted to the downside’’ and the Federal Reserve considers the first rate rise since 2006. Once the darlings of the world economy as they helped lift it from its 2009 recession, emerging markets from China to Brazil have now slid amid declining trade, mounting debt, falling commodity prices and a rising U.S. dollar. The weakness and subsequent sell-off in equity markets is already prompting parallels to be drawn with the Asian financial crisis of the 1990s. For evidence of the rot, look no further than the G-20’s host. The Middle East’s largest economy, Turkey saw its currency plunge more than 20 percent this year while bonds and stocks also tumbled. Foreign investors pulled out more than $5.5 billion from Turkish government debt and listed-company stocks from the beginning of the year through Aug. 21, according to a Bloomberg calculation based on official data. Capital flows into such emerging-market economies fell in August by the most since 2013, according to the Institute of International Finance. Meantime, Morgan Stanley this week cut its growth forecast for emerging markets in 2015 to 4.1 percent from 4.8 percent amid downgrades for China, Brazil and India. By Simon Kennedy and Mark Deen (Bloomberg)