China, Hong Kong, and Malaysia should be on investors’ worry list amid expectations for a U.S. rate hike in 2015, HSBC warned. Current account surpluses in all three countries shrank rapidly between 2008 and 2013 compared with Asian peers, Frederic Neumann, HSBC’s senior economist, said in a report on Friday.
“A shrinking surplus can signal emerging vulnerabilities, just as a narrowing deficit may leave a country more resilient. In short: don’t just look at the current account balance, but at its direction, too,” he said.
Emerging markets suffered a bout of volatility in 2013 when the Federal Reserve first broached the idea of tapering its stimulus program. India and Indonesia were particularly hit hard, with their stock markets and currencies sprawling, because of their wide current account deficits.