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India and Indonesia are faltering.

Both regions are grappling with account deficits, says Raymond Chan, CIO of Hamon Investment Group in Hong Kong. His company manages the Renaissance Asian Fund.

Read: BRICs lose favour as money pours into Europe

Their currencies have also been depreciating over the past three to four months. And to complicate matters, emerging market bonds on the whole are being hit by outflows since “investors require much higher interest rates to hold those bonds.”

Due to these factors, the central banks of India and Indonesia have raised interest rates, says Chan. The downside is the expansion of both countries will be sluggish over the next few quarters.

Both “econom[ies] have to adjust to slower growth in the near term in order [for policymakers] to stabilize their financial markets and currencies,” he adds. This will be the case for any Asian countries with significant account deficits.

Read:

On the flip side, Chan says Thailand and Malaysia are running account surpluses. The Philippines has a surplus right now as well, though the country is currently dealing with the damages caused by Super Typhoon Haiyan.

Prior to that storm, Chan predicted the economic “adjustment processes would be less difficult” for those three countries. Their interest rates are also rising due to global trends, however.

Also read:

Haiyan causes heavy damage but modest insured losses

Where to look in emerging markets

Emerging markets still a good bet

A closer look at China

Originally published on Advisor.ca

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