Pressure on emerging markets shifted from currencies to stocks in Asian trading\u00a0on Wednesday, as prospects for higher funding costs threaten to diminish the appeal of companies benefiting from faster economic growth than in the developed world. The MSCI EM Asia Index of shares was down 1.2 percent as of\u00a01:52 p.m.\u00a0in Hong Kong, with benchmarks sliding 3.3 percent in Jakarta and 1.8 percent in Manila. The rupiah, one of the region\u2019s most vulnerable currencies due to Indonesia\u2019s external financing needs, was little changed after falling to its weakest since the Asian financial crisis\u00a0Tuesday. Underlying the moves: continuing strength in the dollar that\u2019s making offshore debt servicing more costly for borrowers from Brazil to Malaysia to South Africa. A negative tone was set\u00a0Tuesday\u00a0on the one hand by strong U.S. manufacturing data that boosted the odds of further Federal Reserve tightening, and on the other by news that South Africa\u2019s economy had slumped into recession.<\/ \u201cThis has become now increasingly an issue which is no longer just about EM fundamentals,\u201d Sameer Goel, head of macro strategy for Asia at Deutsche Bank AG in Singapore, said in a Bloomberg TV interview with David Ingles. It\u2019s \u201cincreasingly about contagion, which largely happens because of cross-holdings and the pressure of redemptions,\u201d and illiquidity and policy reactions, he said. Indonesian equities extended their slump into a fifth day as policy makers attempt to support the rupiah through measures including interest-rate hikes that threaten to slow Southeast Asia\u2019s biggest economy. Shares in the Philippines extended losses after a report showed inflation - spurred in part by currency weakening - surged past 6 percent last month, foreshadowing further potential rate rises there. \u201cInvestors have become more selective, and countries with negative news such as weak economic growth, weak external balances and high inflation face stronger sell-offs, \u201dsaid Koji Fukaya, chief executive officer at FPG Securities Co. in Tokyo. Outside of the Asia region, worries remain that Turkey\u2019s central bank may not do enough at its policy meeting next week to shore up confidence. And Argentina\u2019s economic outlook has deteriorated even as its officials negotiate with the IMF for accelerated aid. MSCI Inc.\u2019s index of developing-nation currencies slipped, heading for the lowest close in more than a year. The dollar is hovering near its highest level in over a year after a gauge of American manufacturing jumped to a 14-year high\u00a0Tuesday. As U.S. rates rise, investor fears over idiosyncratic risks in emerging markets have climbed, from Argentina\u2019s fiscal woes and Turkey\u2019s twin deficits to Brazil\u2019s contentious elections and a land-reform bill in South Africa. U.S. President Donald Trump\u2019s threats to ramp up a trade spat with China with an announcement of tariffs on as much as $200 billion in additional Chinese products as soon as\u00a0Thursday\u00a0also hasn\u2019t helped. Fixed income has also been hit, with the Bloomberg Barclays emerging-market index for dollar bonds down almost 4 percent so far this year. That leaves it heading for its first negative annual performance since 2013, the year of the taper tantrum. A similar gauge of local-currency debt has fallen almost 8 percent in 2018. One silver lining for now is that China, has taken steps to shore up its own currency, including through the re-introduction of a counter-cyclical factor in the yuan\u2019s daily fixing. Policy makers in the biggest emerging market have also taken steps to sustain rapid growth, helping hold up global demand more broadly. Here\u2019s some further commentary from analysts on the outlook for emerging markets: Anastasia Amoroso, a global investment strategist at JPMorgan Private Bank in New York: Emerging markets are the best asset class for the long-term due to growth potential, but the time hasn\u2019t come yet to start buying. As long as trade wars continue and the Fed hikes at a runaway pace versus the rest of the world, dollar strength will persist. James Lord, an emerging-market strategist at Morgan Stanley in London: Morgan Stanley stays short on the currencies of Brazil, Mexico, South Africa, Russia, Indonesia, India and Philippines against the dollar, euro and yen. September is unlikely to provide much relief to emerging markets, Lord and his colleagues at the bank wrote in a note. Trade tensions may remain a theme, and worries about Brazil\u2019s election campaign will probably intensify. Investors may also focus on the outflows of so-called real money, sanctions on Russia and South African land reform over coming months. Kay Van-Petersen, global macro strategist at Saxo Capital Markets: \u201cIt has to get a lot worse before it gets better\u201d he said on Bloomberg Television. \u201cWhen you get full contagion, everything gets thrown out, and we\u2019re not there yet.\u201d The key catalyst could be Turkey, he said. The market has underpriced expectations for the Fed, and with Trump waging trade wars on multiple fronts, the tariffs end up hurting emerging markets more than they hurt the U.S.