Emerging Markets - main drivers of risk-off mode in 2015

2015 was a challenging year for emerging market (EM) currencies, and 2016 is expected to bring with it some challenges too, albeit many analysts believe that the pace of depreciation will be significantly lower than 2015.

The concoction of expectations of a first US rate hike in over 9 years, coupled with Chinese GDP failing to meet market expectations, as well as the depreciation of the RMB have kept emerging market investors on the side-lines, with volatility expected to persist.

The strong USD, most notably against EM currencies, weakening China growth and deteriorating global trade are expected to continue to act as a drag on EM countries in 2016 as EM countries continue to experience a deteriorating balance of payments and a persistent adverse impact on growth.

Local EM political issues, coupled with the further deterioration in global trade and weak commodity prices are also expected to maintain downward pressure on EM currencies in 2016. In anticipation of this weakness, a number of central banks have counter-acted by adopting a more hawkish stance, driving real interest rates up and putting further pressure on growth.

Chinese GDP data fell marginally below the 7% level...