Markets may be bracing for another tantrum across emerging markets as the U.S. Federal Reserve edges closer to its first rate hike in nine years, but some players say now is the time to swoop up those countries' currencies.
"There's a valuation signal there that's quite strong," Julien Seetharamdoo, chief investment strategist at HSBC Global Asset Management, said earlier this week. "Some of those currencies should strengthen in the medium to long term," he said, noting a preference for Asian emerging markets with supportive macro fundamentals.
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That runs counter to market concerns that higher interest rates in the U.S. will spur outflows from emerging market (EM) assets as higher yields on U.S. Treasurys, considered a "safe" asset, makes riskier assets appear less attractive.
Similar concerns spurred a broad rout, dubbed the "taper tantrum," across emerging market assets in mid-2013 after then-Fed chief Ben Bernanke surprised markets by first broaching a plan for the U.S. central bank to begin tapering the asset purchases under its quantitative easing program.
But Seetharamdoo noted that while other assets, such as fixed income, stabilized after the taper tantrum, EM currencies have now sold off for more than two years. Malaysia's ringgit, for one, has lost nearly 23 percent of its value against the U.S. dollar since the beginning of 2013.