merging markets are expected to enjoy a relief rally as the Federal Reserve delays the inevitable hike in interest rates, but avoid chasing it, say strategists, as gains are likely to be fleeting.
“I think in the short-term, emerging markets will be supported because the Federal Reserve didn’t tighten. Basically, there’s little bit less pressure for U.S. dollar to appreciate, a little bit more liquidity,” said Viktor Shvets, head of Asian strategy at Macquarie Securities.
“There’ll be some relief particularly, in places like Indonesia, Malaysia, up to places like Brazil, South Africa, Russia. Will it last? The answer is no.”
The U.S. central bank on Thursday held off on raising rates amid heightened “uncertainties abroad,” including China’s economic weakness as well as sluggish inflation at home. A rate hike would have ended a nearly 7-year-old zero interest rate policy.
Despite the weak lead from Wall Street overnight, Asian emerging market stocks clocked modest gains on Friday. China’s Shanghai Composite, Indonesia’s Jakarta Composite and Vietnam’s VN Index traded up between 0.4 and 0.9 percent. The broader MSCI Emerging Markets index edged up 0.7 percent.
To be sure, some remain optimistic about the long term growth prospects of emerging market economies.