THE prospect of interest-rate “lift-off” in America gives investors a reason to take their money there. So it has been odd to see a procession of emerging-market officials call on the Fed to get on with it, the sooner the better. Central bankers from India, Indonesia, Malaysia, Mexico and Peru are among those who have professed a desire for America’s rates to rise.
One explanation is that they are a little like patients waiting to give blood, tired of the excruciating wait and just hoping to be done with it. Things could certainly get painful. As it is, capital is already being diverted away from developing countries and towards America. In 2010-14 non-residents put $22 billion into emerging-market stocks and bonds every month, on average. In November they moved $3.5 billion out, the fourth month of such outflows in the past five, according to the Institute of International Finance, a trade association.
Further outflows in the coming months would put more pressure on the beleaguered currencies of many emerging markets. Depreciation makes their hefty external debts even more daunting. Dollar credit to non-banks...Continue reading
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