In December, I wrote a piece of how the emerging markets would be hit hard once the Federal Reserve Bank decided to taper on its bond buying program that were responsible for the rallies experienced on different stock markets around the World. For the next two days the Federal Reserve Bank popularly known as the FED, will meet and expectation is that they will cut bond buying by 10 Billion dollars to 65 Billion Dollars. This decision is expected on Wednesday.
Locally…
The effect is begging to manifest on the Nairobi Stock Exchange with continued foreign investors sell-side an action I attribute to fears of the FED taper as well as fears that the market could be overvalued. However, there seems to be a local driven rally where most of the local investors are involved in the buy-side action. I however doubt this trend will continue for long not unless there is a successful sale of the Eurobond by the government that would ultimately reduce borrowing by the government and possibly lower interest rates making borrowing to invest cheaper and thus a continued local rally.
Global…
On the International Front however, things do not seem rosy at all. The SA currency has been in the gutter doing badly even against the local shilling. The Argentina Peso declined by 11% in a single day last week while the Turkish government is in turmoil over corruption allegations attributed to the flooding of the economy with stimulus dollars. In fact, the Turkish economy has been a huge beneficiary of the FED money. With the FED withdrawal and emerging graft allegations, The Turkish Lira is likely to have its value eroded further. The Lira recovered on expectation that the Central Bank would increase interest rates to bolster price stability according to Investing.com.
Forex Market…
Gold, the safe haven is now a favorite commodity to own. Gold seems to be rallying amidst all the turmoil the emerging markets are facing. Gold futures are up and most of the traders I follow are bullish about the prices of Gold.
Yen, the Japanese Currency is also a favorite ship to jump on especially a currency basket of the Japanese currency. As part of Abenomics, the Japanese Central Bank intends to extend its bond-buying program to remove the economy from deflation. My currency Basket currently has the USD/JPY, GBP/JPY on expectation of FED tapering. I am in the GBP/JPY on expectation of retracement in Quantitative Easing by the Bank of England soon. The New Zealand Dollar-Yen is also a good combination.
If you feel a little risk averse in this market, you can jump the Bitcoin wagon BTC/USD rose to a session high of USD1,038.16 “on the view that it’s an alternative currency”
Markets Trend 