— This is the script of CNBC's news report for China's CCTV on January 28, Tuesday.
Welcome to the CNBC Business Daily.
Investors are battening down the hatches in anticipation of further volatility as the US FOMC assembles for a two-day policy meeting this week. CNBC's Steve Liesman has the details:
The Fed is set to meet this week amid considerable tumult in EM and EM currencies but the general view is that the Fed will continue its plans to reduce the amount of purchases by $10 bn at the January meeting.
A general sense is that there's not enough concern at the Fed with what's happening in EMs to keep from its plans to reduce quantitative easing by $10 bn to what would be then $65 bn a month.
The question the Fed will ask is: "Does what's happening in emerging markets change the forecast and the answer is probably no. Does it represent systemic risk? And again, the answer, probably no."
The more unknown question is: "Are there underlying macroeconomic concerns and are they troubling.?"
For example, external threats to GDP and current account deficits? And right now the thinking is they do not add up to a systemic risk or a broader macroeconomic issue for the globe or the United States in general.
Here are some of the averages that we've looked at: The external debt to GDP. You can see that some countries are running ahead of their ten year average, but not uniformly.
A lot of the thinking about emerging markets right now is that these are episodic concerns. Political concerns for example in Turkey, an ever present currency problem in Argentina and these are issues that are going to have to be worked out individually by countries, and not ones that would warrant a response from the Federal Reserve.
So the Fed thought to be on track to taper by $10 bn this meeting and January, to bring it down to $65 bn. Back to you guys.
So is there a way for investors to profit from the emerging markets rout? Here's what the analysts we spoke to had to say:
[Soundbyte on tape by İbrahim M. Turhan, Turkish Borsa CEO] This kind of volatility can happen at anytime. But I think as things will be settled in the very near future, what will remain will be the general outlook of the Turkish economy, which is great. I think this kind of temporary depreciation actually offers an opportunity for investors because this makes Turkish assets relatively cheaper.
[Soundbyte on tape by David Roche, Global Strategist, Independent Strategy] The problem is that each of these emerging markets - whether you look at Brazil, Indonesia, India etc, have got internal structural problems that have not been addressed. At the same time, you have a loss in confidence in China's financial system and people worrying that that will cause economic collapse. The growth rates are going to be awful. They've got bad credit problems, they've got productivity problems, it's going to be many years before they go back to being miracle economies again.
Li Sixuan, from CNBC's Singapore headquarters.
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