The wealthy economies of Singapore and Hong Kong are perhaps not the first that analysts associate with instability, but according to international research house Capital Economics, they’re the ones most likely to be burned by U.S. Federal Reserve rate hikes.
Most analysts expect the Fed will raise interest rates in mid-2015 once it has finished winding down its tapering program. With their domestic interest rates tied to the Fed, Daniel Martin, emerging markets economist at Capital Economics, said Singapore and Hong Kong are particularly vulnerable to such moves.
“These countries are the only two countries that we cover that have the dual problems of rapid recent credit growth and a lack of exchange rate flexibility,” Martin told CNBC.
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