Commenting on the recent Emerging Market crisis, Mihir Kapadia, CEO of Sun Global Investments has said:
“Emerging Market assets continue to be under pressure as a resilient dollar boosted by increases in Fed interest rates and worries about excess leverage continue have a negative impact. There is an increasing threat that a US-initiated trade war will spill over further into the global economy – such worries have led to currency pressure in countries including Turkey, South Africa, Argentina, Indonesia and India. For a heavy energy importer like India, the resilient dollar along with higher prices are having a double impact on its currency.
While the combined effect of rising oil and dollar has been the stress factor, the main issue continues to be trader sentiment over protectionism polices. Countries such as India and Indonesia are continuing to experience positive and firm growth though their currencies have been among the worst performers in the EM basket. The key action to stabilise their currencies would be to increase inward investment while trying to narrow down the trade deficit. However such measures, even if implemented, can only work in the medium to long term.
The UAE, which is largely driven by oil revenues, is experiencing faltering growth in non-oil sectors. The UAE central bank yesterday had cut its forecast for economic growth this year after non-oil growth slowed slightly in the second quarter.
One of the main factors weighing on the UAE economy has been the slump in real estate markets – in the second quarter, Dubai property prices fell 5.8 percent from a year earlier and 1.7 percent quarter-on-quarter.”