Emerging Markets Enjoy Rise After FOMC Holds Rates

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.


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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza