Emerging market stocks gave up their gains on Friday, doing little to alleviate the pain that has been inflicted on the asset class over the previous four days.

EM stocks, as measured by the benchmark MSCI Emerging Markets Index, are on track for their worst week in more than four years as fresh market turmoil in China, further weaknesses in crude oil prices and continued strength in the US economy prompted investors to dump their riskier positions.

Having risen by as much as 0.5 per cent earlier on Friday, the index retreated to close unchanged from their Thursday level after a blockbuster US non-farm payrolls report raised the likelihood that the Fed will raise rates four more times this year.

Friday’s recapitulation takes the index’s loss this week to 7 per cent, its worst weekly performance since September 2011.

That investors are wary of EM equities is no surprise. The sharp fall in commodity prices, along with the economic slowdown in China have already cast a pall over the growth prospects of many major EM stocks. Adding to the headwind has been the rampaging dollar, which eats into the local returns for foreign investors and rising bond yields, which are making equities a less enticing proposition for increasingly risk-averse investors.

Indeed, the JPMorgan Emerging Market Currency Index tumbled to a new record low on Friday – with the Mexican peso, the South African rand and the Russian rouble among those touching new lows this week.

Analysts at UniCredit think EM currencies could weaken further still:

A number of negative catalysts are in place for EMFX. While EM currencies have already been battered since the beginning of the year, we believe that further weakness is in store. While EM data have been better of late, a combination of (a) rising CNY depreciation expectations, (b) still falling commodities, and (c) more hawkish Fed rhetoric, are negative catalysts for EMFX as a whole.

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