Foreign investment in emerging markets (EM) has dropped to the lowest level since the financial crisis as investors brace for the fallout of the first United States interest rate rise in nearly a decade.

Years of growth fuelled by access to cheap funding by virtue of low interest rates in the developed world and China’s robust appetite for commodities are seen ending, leading economists at the Bank of International Settlements to warn of negative spillovers as borrowing costs rise.

Prices in popular emerging market debt and equity benchmarks have already fallen, while net inflows from overseas investors have dropped from $285 billion (€259 billion) in 2014 to $66 billion (€60 billion) this year, according to the Institute for International Finance. Currencies in many emerging markets remained under pressure on Monday, as did their equity markets, with lower oil prices also a factor. The Russian rouble hit new lows, while the Brazilian real also slumped on fears of a prolonged recessions. Shares in both markets fell sharply.

Investors are divided as to whether the anticipated rate increase by the US Federal Reserve this month has already played out, or will intensify stress for indebted companies and economies.

“This has been a miserable year for EM,” said Paul McNamara, investment director of emerging markets at GAM, the Swiss fund house.

“There has been a steady bleed out of assets and no one is certain what shape the market might be in this time next week.”

Anxiety has been fanned by the build-up of corporate debt in EM, which doubled between 2008 and 2014 and has been one of the fastest growing areas of the global bond market.

EM-focused fund groups have endured a torrid year with sharply lower assets under management and funds leading EM exchange traded funds.

– Copyright The Financial Times Limited 2015