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Komfie Manalo, Opalesque Asia:

Bruno Pannetier, CIO of London-based asset management firm Old Park Capital said that quantitative easing (QE) tapering by the Fed has meant excess liquidity in emerging markets has dried up and their economies are left frail and naked.

Pannetier said, "The Fed’s decision to begin QE tapering on 18 December surprised many as the consensus was that tapering would not begin until the first quarter of 2014. The equity rally that followed was a surprise too. The recent and expected economic growth, especially in the U.S., coupled with reassuring comments/forecasts from the Fed have led many market participants to believe that growth may be stronger than expected, which could compensate for the increase in long-term interest rates which is likely to occur as the Fed reduces QE."

He said this situation would naturally put the spotlight on corporate earnings growth and whether earnings growth will be enough to compensate the expected increase in long-term interest rates. This means a departure from what has been the market focus over the last few years.

"Over the last five years, the main drivers of market behaviour have been macro news as this data was driving risk premia, with an expansion of risk premia from 2008 to 2011 followed by a contraction in 2012 and 2013 as major structural issues driving the fiscal/monetary policies were resolved and macro data improved,"......................

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