Darren Sinden – market commentator for Admiral Markets – joined Nick Batsford and Zak Mir in the Tip TV studio to discuss the potential for a US interest rate rise, and how it’s already affecting emerging markets.
Has the price already accounted for this?
Sinden believes that we’re unlikely to see a sharp move in the build up to, or following any decision from the Fed, instead predicting a long-term selloff. With the IMF, World Bank, and OECD all having warned about the implications of a US rate hike on EM economies, it may be that we’re already seeing a pre-emptive squeeze.
The chickens are coming home to roost.
Countries with a private sector credit to GDP ratio of greater than 10% have a 66% chance of enduring serious banking strains. As Darren Sinden highlights, Brazil, Turkey, and (unsurprisingly) China have all exceeded that level. With emerging markets having borrowed heavily in US dollars when interest rates fell to zero, they could now be facing the consequences.
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