Hi David, This article was published today in the Financial Times. I will appreciate your comments. Best regards, http://www.ft.com/cms/s/0/46f42c36-8965-11e5-90de-f44762bf9896.html

David Fuller's view

Here is a PDF of the FT article.

The article is a concern because no one really knows how all the QE will play out, not least as the US leads countries back towards a normalisation of interest rates, as we last saw before the credit crisis recession of 2008.  Opinions vary widely on this topic, leading to considerable disagreement when it is frequently discussed, whether in the press or on financial TV channels.  

I have briefly mentioned my own concern about EM borrowing in practically every Big Picture Friday Audio over the last year, although I have described it, possibly simplistically, as the low cost borrowing of dollars when the highly liquid US currency was still very cheap.  In other words, before the Dollar Index’s (monthly & weekly) big rise commencing in 2H 2014.  

The best advice I can give on this uncertain topic is to keep an eye on what used to be called ‘the little tigers’ - mainly Singapore, Indonesia, The Philippines, Thailand and Malaysia - which I mentioned in Wednesday’s Audio.  Singapore has gone mostly sideways since 2010, while the others are not all that far from the lower side of their ranges since 2013.  If all is well with Wall Street leading to the upside, they should resume their recoveries from the September lows before yearend.  Conversely, breaks beneath those lows by former ‘little tigers’ would be a warning. 

The predominantly commodity exporters are another matter, battered by historically low prices and governance problems in many of these countries.  However, commodities appear to be basing and cyclical recoveries have been explosive in other cycles.  Their currencies would also rebound from the current bombed out positions.