Emerging Market Debt Vulnerable to Fed Moves

Policy makers in emerging markets should be hoping the Federal Reserve continues on its path of gradual interest-rate rises as some are exposed to any sharp increases in the U.S., according to Morgan Stanley.

The exposure is a result of substantial external debt linkages. Most emerging-market external debt — 20 percent of gross domestic product — is denominated in a foreign currency, with the largest component being corporate debt in U.S. dollars.

Overall foreign currency debt in the emerging markets excluding China rose from 22 percent of GDP in 2011 to 30 percent in the first quarter of this year. Most of the increase comprises longer-term obligations, with the level of short-term loans remaining relatively low at 8 percent of GDP.

Bloomberg

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Craig Erlam

Craig Erlam

Senior Market Analyst, UK & EMEA at OANDA
Based in London, Craig Erlam joined OANDA in 2015 as a market analyst. With many years of experience as a financial market analyst and trader, he focuses on both fundamental and technical analysis while producing macroeconomic commentary. His views have been published in the Financial Times, Reuters, The Telegraph and the International Business Times, and he also appears as a regular guest commentator on the BBC, Bloomberg TV, FOX Business and SKY News. Craig holds a full membership to the Society of Technical Analysts and is recognised as a Certified Financial Technician by the International Federation of Technical Analysts.
Craig Erlam