After the Federal Reserve failed to raise rates in September, market consensus for the timing of the first interest rate in over six years has shifted to early 2016, with many analysts eyeing March, which is a bonus for emerging market sentiment.
But even with the aid of a dovish Fed, EM fundamentals "continue to deteriorate", head of EM strategy at Societe Generale, Guy Stear, as growth prospects do not look rosy.
The fall in commodity prices is of particular concern to oil exporter budgets , he said, estimating that the weighted average EM fiscal deficit should widen to 4.3 percent of GDP this year, from 2.6 percent in 2014. With a number of countries including Turkey, Kazakhstan, South Africa and Chile all facing renewed "significant" downgrade pressure.
"When considering other factors, including fiscal position, debt burden (public and external), the level of foreign investments, the change in FX reserves and the state of the banking sector, we find that all these fundamentals are deteriorating," Stear said.