– This is the script of CNBC's news report for China's CCTV on August 24, Monday.
Welcome to CNBC Business Daily, I'm Qian Chen.
Emerging markets are in free fall.
Currencies are reeling, stocks are tanking and commodities are sinking, evoking memories for many investors of the financial crisis that hit Asia hard in 1997 and 1998.
Concerns over a slowdown in China have dented confidence, while investors have also fretted over the impact on emerging markets of an imminent increase in interest rates by the U.S. Fed.
The latest is the Kazakhstan tenge, which tumbled more than 20 percent Thursday against the dollar after the Central Asian country said it would adopt a free-floating currency policy. On Wednesday, Vietnam devalued its currency for the third time this year.
Earlier this month, China allowed its currency to devalue, sending the yuan down about 2 percent against the dollar.
Currencies in other emerging market countries such as Turkey, Russia, Malaysia and Brazil have also plunged this year.
The selloff in currencies comes from foreign investors and emerging market companies that borrowed U.S. dollars while interest rates were low, and are now facing a "currency mismatch" paying the money back as the greenback rises, analysts told CNBC.
If the Fed indeed doesn't act in September, how will that affect the EM?
Would that mean a slower phase of capital outflows, or a short rebound in the FX markets against the greenback?
Ray Attrill, from National Australia Bank, said that might not be the case.
[Ray Attrill, National Australia Bank] "We know the market has been very short euros, very long USD, very short Yen. So, I think this short of somewhat perverse move in relation of what's clearly very very accure risk-off market environment, speak of more positioning, than necessarily of the view that the Fed isn't going to raise rates now and we should generally be weakening the dollar, but ultimately you would think that the "safe-heaven" flow would still bring the dollar stronger."
For now, the China market and the YUAN movement will be in focus.
Global investors are watching closely if there's any policy change from the PBOC this week.
[BEN SY, Head of Fixed Income, FX & Commodities, JP Morgan] "We think in the next couple of weeks, definitely, if the economic (data) are slowing down further, FX under further pressure, I think they will intervene the FX market to keep the fixing in a more stable level, and then they will look at cutting RRR, you know, because interest rate is suiting up, in the last couple of days because, I think, part because capital flights from China. It's the middle of time in the near term, they will do either RRR cut, or cut interest rate again."
CNBC's Qian Chen, reporting from Singapore.
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