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Emerging market equities continue on a downwards trajectory since peaking back in January. Having corrected 12% since its apex, the MSCI EM Index is now down 2.8% YTD and we estimate that the correction process has only just passed the half way mark, with a further 10% downside to be reached between mid-August and early December.

Potential causes of this continued decline are: firstly, the ongoing strengthening of the US dollar; secondly, Fed rate hikes coupled with a US economy break away from the rest of the developed economies (which are showing signs of stalling); and thirdly, the prospect that many emerging and frontier market countries, such as Nigeria, may be forced to raise interests rates in order to defend their own currencies.

The biggest losers in the last month have been Brazil and Ghana. Year to date the biggest losses have been seen in The Philippines, Bangladesh and Turkey, with the latter scheduled to hold elections this summer. Countries with markets still firmly in the green include Ukraine (+46% ytd), Tunisia, Kazakhstan and Slovenia.

In frontier markets, focus is on MTN Ghana’s IPO, slated to be the largest in Ghanaian history. This will be followed closely with the listing of MTN’s Nigerian unit.

In the income market, issuers are having to come to terms with the 65bps uptick in emerging and frontier market US dollar bond rates over the last six weeks, making raising money a hard endeavour unless they re-price the deal.

This article originially appeared on Banks.com.gr

(Reporting by Harold Warren, Global Head of Emerging Markets)