“This is a dangerous period,” Jen added. “The Fed will start to normalize rates. It’s a gradual process, but the pressure will only point in one direction, which is in favor of the dollar and against emerging markets.” [Dollar ETF in Two-Day Surge After Bernanke Comments]
After years of “substantial inflows,” emerging markets are “vulnerable” to “global portfolio relocations,” Deutsche Bank AG analysts led by Marc Balston, said in the article.
JPMorgan is also warning clients to stay underweight in emerging market assets due to “negative momentum.”
“Developed-market investors have been heavily favoring emerging-market bonds and equities in recent years” due rapid economic expansions “systematically cheap” assets, JPMorgan strategists said in a note. “They are now starting to wonder whether this is still the case, and are slowly moving to neutral on emerging markets.”
For more information on the emerging markets, visit our emerging markets category.
Max Chen contributed to this article.