EM currency rout may hit profits of Europe, US and Japan MNCs

THE emerging market (EM) currency rout is expected to dent profitability of European, US and Japanese multi- national companies.

Such has been the depreciation of Asian, Latin American, South African and other emerging currencies that regional turnover and profits translated into US dollars, euro, yen and sterling are likely to be lower. Moreover, exports to India, Brazil, Indonesia, Malaysia, Thailand, Argentina, Turkey, South Africa and other nations which have experienced massive currency devaluations could fall sharply (see table).

US and European banks and investors "are wearing rose-tinted glasses", says Brendan Brown, London-based economist at Mitsubishi UFJ Securities International. "So far, the emerging market currency collapse has had minimal impact on developed stock markets and the euro and sterling."