Across emerging Asian markets, growth has been solid and exports are holding up well, so the policy focus needs to be oriented toward dealing with inflation.
Expect more rate hikes in the new year. The most likely suspects are India and South Korea. In fact, only Indonesia has really resisted this move among major countries to normalize its rate policy, but we look to see action there in the next few months.
Currencies will play a role in this inflation cycle. This may have been underestimated during the severe recession, but now Beijing’s move toward higher rates will let the yuan appreciate naturally. As China’s currency strengthens, others in the region — everyone from Korea to Thailand — will have more flexibility to do the same thing without destroying their local exporters’ ability to compete in a global marketplace.
Watch to see WisdomTree Dreyfus Emerging Currency (NYSE:CEW) — the emerging markets currency fund — on the rise in the new year. This fund is 42% weighted toward currencies like the yuan as well as the Taiwan dollar and the Korean won, along with the rupee and Malaysia’s ringgit.
Emerging Money provides insightful and timely information about the increasingly important world of Emerging Market investments. CNBC Emerging Markets Contributor Tim Seymour leads the team of Emerging Money to bring you cutting edge global news and analysis.
About Tim Seymour: Tim is a founder of Emerging Money. He is a founder and Managing Partner at Seygem Asset Management, and The Emerging Markets Contributor to CNBC. Seygem Asset Management focuses on investing throughout the global emerging markets asset class. With a view that emerging and developing economies will continue to outpace the economic growth and advancement of developed economies, Seymour has devoted a career to investing in the dominant markets of tomorrow, today. Seymour’s career has included significant experience in both alternative asset management (hedge funds) and capital markets, having launched two hedge funds, and built the largest Russian broker dealer in the USA. Seymour started his career at UBS, focusing on international credit (cash, swaps, forex) in a specialized hedge fund group (New York). Seymour completed the firm’s training program after graduating with an MBA in international finance from Fordham University. Seymour received his undergraduate degree at Georgetown University.