Moreover, with the surge in safe-haven interest, the U.S. dollar has strengthened, which will continue to weigh on commodity prices – commodities are priced in U.S. dollar, so a stronger dollar makes them more costlier for foreign buyers. Consequently, big commodity exporting emerging markets, notably those in Africa and South America, could also come under pressure.
Related: Strong U.S. Dollar, Global Uncertainty Weigh on Oil ETFs
However, some see emerging markets as an opportunity. Geoffrey Dennis, head of global emerging-market strategy at UBS Securities, argued that the Brexit fallout will only have a modest effect on the developing economies, Bloomberg reports. For instance, Asian countries could attract more inflows as investors flee Europe’s uncertainty.
Moreover, the extended low-rate environment in the wake of the ongoing uncertainty could help maintain the emerging market play.
“Brexit is generally negative for growth but could end up helping emerging countries, especially in Asia, as it pushes back the Fed raise,” Brett Diment, head of emerging-market debt at Aberdeen Asset Management, told the WSJ.
For more information on the developing economies, visit our emerging markets category.
iShares MSCI Emerging Markets ETF