Sunday, March 26, 2023
Homethe worlds biggest risksEmerging market rout 'a long time coming': Rhodes

Emerging market rout ‘a long time coming’: Rhodes

Bill Rhodes, president and CEO of William Rhodes Global Advisors, told CNBC that he had been expecting a sell-off in emerging markets ever since the U.S. Federal Reserve first announced it was scaling back its massive stimulus program.

Rhodes — who was a key negotiator in the debt restructurings of some major emerging markets in the 1980s and 1990s — said that those countries that had not managed to reform their economies were "going to get hit."

"This has been a long time coming once the tapering was announced," he told CNBC's European Closing Bell.

"All of this action began because the funds had been flowing into emerging markets when we had quantitative easing… Well now you're getting the opposite of that."

On Wednesday, the Fed confirmed that it would scale back its monthly bond-buying program — which has boosted risk sentiment and emerging market currencies — by another $10 billion.

(Read more: Could this currency sell off like Argentina's peso?)

Despite every effort from policymakers and central bankers, the latest emerging markets sell-off — particularly in currencies — has continued.

The Argentinian peso slipped further on Thursday, and has now fallen over 20 percent against the U.S. dollar since the start of this year. There are also growing concerns about Hungary's forint, which bore the brunt of the Thursday's selling pressure and is now down over 5 percent since the beginning of this year.

Currencies such as the Brazilian real and the Turkish lira pared some losses on Thursday, but are still down respectively 2.0 percent and 4.6 percent against the dollar since 2014 began.

Rhodes said that he found countries like Argentina and Turkey especially troubling, given their high current account deficits and low reserve levels.

"These countries have to take these steps of tightening — raising interest rates — and you're going to see more of that before we're through here," he said.


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