EMs prep defences against ‘crazy’ Fed

Emerging markets are in much stronger shape to withstand any volatility created by a US Federal Reserve intent on raising interest rates than they were in previous tightening cycles.

  • By Owen Sanderson
  • 13 Oct 2018
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Emerging market countries are preparing their defences against rising US interest rates, as President Trump weighed in to brand the Fed “crazy” for hiking rates. Fed chief Jay Powell will likely shrug off his tempestuous boss and keep going, but investors and bankers alike see most emerging market countries as stronger than in previous tightening cycles.

“People here are saying the Fed needs to focus on what tightening means for Argentina or for Turkey or other countries, but the Fed was created by its own government and has a primary responsibility for domestic policy,” said Randall Kroszner, professor of economics at the University of Chicago, and a former Fed board governor, speaking at the IIF Annual Membership Meeting in Bali. “If you look at countries that haven’t been hit… they’ve got their macroeconomic house in order. For countries like Argentina and Turkey, the Fed is essentially saying that the shock is coming from you, not us.”

Trump’s comments were likely inspired more by falling US equity markets than concerns over emerging market debt sustainability — the US president has previous branded some of the more vulnerable countries “sh*tholes” — and he has previously described himself as a “low interest rate guy”.

Jacob Frenkel, chairman of JP Morgan Chase International, said: “When I’m driving, and the road bends to the right, I turn the steering wheel to the right. That doesn’t make me a ‘right steering guy’.”

Frenkel argued that hiking was rightfor the US economy, but acknowledged the risks to emerging markets, and said that they could not do much about it, except have defensive policies.

“If you ask yourself which countries in the emerging world did best in the most recent crisis, and see they’re the ones with high capital, high liquidity, low leverage, responsible fiscal policy and flexible exchange rates, you get a clue about what EMs need to do,” he said.

Christopher Marks, head of emerging markets EMEA at Mitsubishi UFJ, said: “Countries are engaging earlier to manage spikes in refinancing, using tools like exchanges and liability managements, with support from the MDBs, which are increasingly offering guarantees to help the restructuring and reprofiling of debt. They’re seeing that this can be a better use of their balance sheets than the traditional route of providing liquidity for specific projects.”

Rob Drijkoningen, head of emerging markets debt at Neuberger Berman, said emerging markets were much stronger than during the Asian crisis, pointing to fundamental reforms in larger markets like India and China, as well as small markets.


  • By Owen Sanderson
  • 13 Oct 2018

All International Bonds

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 Citi 329,208.56 1277 8.09%
2 JPMorgan 321,584.64 1392 7.90%
3 Bank of America Merrill Lynch 296,878.25 1014 7.29%
4 Barclays 249,463.73 926 6.13%
5 Goldman Sachs 218,838.41 733 5.38%

Bookrunners of All Syndicated Loans EMEA

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 BNP Paribas 46,136.68 182 7.00%
2 JPMorgan 44,545.29 93 6.76%
3 UniCredit 35,639.50 153 5.41%
4 Credit Agricole CIB 33,211.72 160 5.04%
5 SG Corporate & Investment Banking 32,419.80 126 4.92%

Bookrunners of all EMEA ECM Issuance

Rank Lead Manager Amount $m No of issues Share %
  • Last updated
  • Today
1 JPMorgan 13,755.50 61 8.94%
2 Goldman Sachs 13,469.15 66 8.76%
3 Citi 9,716.40 55 6.32%
4 Morgan Stanley 8,471.86 53 5.51%
5 UBS 8,248.12 34 5.36%