Emerging Markets

18/11/2008

Global emerging equity markets fell sharply in October in local currency terms against a background of heightened concerns about global financial and economic conditions and a sharp sell-off in equity markets across the world. Globally, governments and central banks intervened with bank rescue packages and interest rate cuts. This included a coordinated 50 basis point rate cut by major central banks such as the US Federal Reserve, European Central Bank and Bank of England. Commodity prices also weakened further as the global growth outlook deteriorated, a negative for several emerging markets. However, emerging markets rallied towards the end of October in the wake of a second US interest rate cut for the month and the Federal Reserve’s announcement of temporary reciprocal currency arrangements (swap lines) with Brazil, Mexico, South Korea and Singapore. The International Monetary Fund (IMF) also announced the creation of a new facility that can be drawn on by emerging market countries with a track record of sound macro-economic policies.

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