Where are you when the Fed hikes rates?

With a 75 percent chance of a rate hike by the Fed, let us have a look at the environment and the probable implications:

• ·         Oil glut  (plus for emerging economies who are importers); Short sell?
• ·         Gold Fall (should positively impact on current account of gold importers like China and India) Short Sell? 
• ·         Commodity price falls should reduce input costs of emerging economies but harm resource based economies
• ·         Emerging markets (already deserted by the FIIs)  will fall a trifling more as the last of the doubters leave for New York.
• ·         Emerging markets' corporates could have their borrowing costs high if they have resorted to dollar funding. The appreciation in the dollar could see corporates struggling to pay back.
• ·         Chinese growth rate may continue to be under pressure in a inevitable deceleration accentuated by a lack of transparency.   
• ·         India's growth rate will be under pressure from its combat loving and 'bickering petty' politicians who cannot have any consensus on reforms which need legislative sanction;
• ·         India's financial sector will start feeling the impact of latent non - performing assets which are in filibustering pipeline-  stressed assets, restructured assets. Its regulators are slow and far behind a runaway sector.
• ·         Japan may be attempting to return to growth but the tendency to revert to recession is so strong that the Japanese industry has to hollow out to other emerging economies such as India. ( bullet train diplomacy)
• ·         Natural resource endowed countries from Saudi Arabia to Australia will have to borrow at higher costs abroad. Commodity prices will look further south. 

So it looks good to buy safely in to advanced countries' assets  and the dollar. May be the Japanese Yen and Great British Pound may seem to be a parking slot for euro sceptics.  

This blog recommends no investment. All views expressed here are without any risk or responsibility.