LONDON (Reuters) - Looser monetary policy from major central banks will help relieve some of the pressures felt by emerging markets but U.S.-China trade tensions remain an urgent concern, a senior official at Fitch Ratings said.
Turkey, Russia and South Africa are among those to benefit from a stampede to high-yielding assets in recent days as investors bet the United States Federal Reserve will cut interest rates as early as next month and Mario Draghi hinted of further monetary easing by the European Central Bank (ECB).
Among the big movers, the Russian rouble surged to its highest level since August 2018 while South Africa’s 2044 dollar bond reached its highest point since January 2018.
But Fitch managing director Tony Stringer said any positive lift could be short-lived.
“More accommodative monetary policy from the major central banks, including the Fed and ECB, could to some extent mitigate some of the pressures felt by the major emerging markets, but we don’t think that will be sufficient to be prevent all the damage that could come from an escalation in trade tensions between the U.S. and China,” he said on the sidelines of a conference.
Further policy easing from the Fed was not guaranteed to reignite capital flows to emerging markets, he added, pointing to the fall in capital flows to emerging markets in April and May, even after the Fed adopted a more dovish stance.
“Apart from the trade tensions, other factors that are weighing heavily on emerging markets more generally are the downturn in global manufacturing and investment, and those factors combined in our view will outweigh any benefit you might see from accommodative monetary policy,” he said.
Editing by Mark Heinrich