Friday, March 04, 2005


DEBKAfile - A Sharp Weather Eye Advised on Emerging Markets
DEBKAfile’s financial analyst warns investors that a sharp sell-off may be round the corner as American interest rates continue their upward march.

The main risk for investors in emerging markets is a possible sharp rise in long term US interest rates. This will touch off a massive sell-off in the emerging markets because higher American interest rates will inevitably make emerging, high-risk markets less attractive.

Given the continuous short term dollar interest rate hikes and predictions of a rise in long term US interest rates, combined with the stampede of investors into emerging markets, there is a very real risk of a sharp and violent correction in the emerging markets in the coming weeks.

The currencies/markets that appear most vulnerable are Turkey and South Africa and, to a lesser degree, Poland, Hungary and Mexico.