The Federal Reserve’s decision to delay the widely anticipated tapering of asset purchases last week raised great expectations for a solid run in emerging market equities, but the party already looks to be short-lived.
“Just as the collapse in emerging markets assets [after] the May [Federal Open Market Committee] meeting was overdone, the current pace of rally since the September FOMC meeting is likely to peter out soon. The fundamental risks and potential growth drivers for emerging markets have not changed,” Shweta Singh, economist at Lombard Street Research wrote in a research note.
After rallying between 3.4 and 4.7 percent on Thursday following the FOMC’s decision to keep its extraordinary monetary stimulus intact, Indonesia’s benchmark Jakarta Composite Index, India’s Sensex index and Thailand’s SET index have begun to give up gains. The indexes fell between 1.0 and 2.4 percent on Monday, their second session of losses since Thursday’s post-FOMC rise.
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