Emerging Central Bank Rate Hikes Will Bolster Local Debt, Weigh On Stocks

• Central banks in developing economies ramping up interest rates will be supportive for emerging market debt and provide a buffer against policy tightening by the U.S. Federal Reserve, but could spell trouble for equities, BlackRock said on Monday. 
• "Central banks across the emerging world have been raising interest rates to try to contain inflation and prevent their currencies from depreciating sharply," said Wei Li, global chief investment strategist at the BlackRock Investment Institute at the world's largest asset manager. 
• A weighted average of policy rates across emerging markets that are part of JPMorgan's global diversified index now stands at 3.2% and is expected to rise to just under 5% in a year. This compares to near zero or negative rates in the United States and the Euro area. 
• "This makes us cautious on EM equities, but has made selected EM debt more attractive in a world starved for yield”. Said Wei Li.

(Source: Reuters)