Fed tightening & EMs: what to watch for

The likelihood that the Fed will begin to raise interest rates this week has sparked fresh concerns about the knock-on impact on emerging markets. However, we think that most EMs are now well placed to withstand Fed tightening. Countries with large external financing requirements (Turkey, South Africa, Malaysia, Colombia) and those with sizeable dollar debts (Turkey, again) are vulnerable, but the risk of widespread problems is low – particularly in the early stages of the tightening cycle.