Crisis, what crisis? That's the message from trader, Ken Veksler, on claims emerging markets are being engulfed in another acute emergency. The Director of Accumen Management says the potential is there but what we've actually seen is just a depreciation of some currencies and increased volatility in stock markets.
The combination of tapering in the US and the weakening of
emerging market economies have led to big currency swings; in January the Turkish Lira
fell 6 percent, the South African Rand dropped 7.5 percent and the Russian
ruble hit a five-year low. But Ken says much of the perceived problem has been inflamed by media hype.
Central Banks around the world are taking action; notably on
28 January, the Turkish central bank raised its benchmark one-week lending rate
for banks from 4.5 percent to 10 percent in order to boost the lira. And Raghuram
Rajan, the governor of the Reserve Bank of India, stepped out to criticise the
gradual removal of accommodative monetary policy by the Fed.
Speaking about this, Ken says: “To be honest, it’s just
silly. Not only has that move been telegraphed for months now but it’s not like
there’s been an immediate stop to QE.”
He adds: “EM currencies are taking the brunt. Whether it
becomes more structural and follows through down the road remains to be seen.
There is potential for that to happen but the whole notion that it’s a crisis
is just media hype.”