Emerging-market currencies slumped this year by the most in almost two decades and analysts are forecasting further losses in 2016 due to China’s slowdown and rising U.S. interest rates.

The deteriorating sentiment also hurt stocks and bonds, with an index of equities covering developing countries posting the biggest annual drop since 2011. The premium investors demand to hold emerging-market sovereign debt widened for an unprecedented third year after the Federal Reserve took the long-awaited move of tightening monetary policy and signaled more to come.

UBS AG and Citigroup Inc. strategists said this month that more pain is in store because developing markets haven’t fallen enough to reflect subdued global growth. A slump in commodities that pushed down the price of Brent crude is also damping confidence as economists forecast China, the world’s second- biggest economy and a major buyer of raw materials, will slow further in 2016.

“Fundamentally, none of the emerging-market currencies are going to buck against the tide of a stronger dollar,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd. “The focus for the Fed has shifted from lift-off to the next rate hike. We could be stuck in the low-for-longer scenario for commodity prices.”

Exchange Rates

A measure of 20 developing-nation exchange rates depreciated 15 percent in 2015, the steepest slide since the 1997 Asian financial crisis, when it slumped 23 percent. All but six of the 24 emerging-market currencies tracked by Bloomberg are expected to weaken again in the next 12 months, with Argentina’s peso, the Brazilian real and the Indonesian rupiah seen falling the most, according to data compiled by Bloomberg. The former two led losses this year after wiping out at least a third of their value.

The Bloomberg Commodity Index tracking 22 raw materials sank 25 percent this year, while Brent crude plunged 36 percent. China’s gross domestic product is forecast to increase 6.5 percent in 2016, slowing from an estimated 6.9 percent in 2015, the weakest pace in 25 years, according to a Bloomberg survey of economists.

“It will continue to be highly volatile,” Nathan Griffiths, a senior emerging-market equities manager who helps oversee $1.2 billion at NN Investment Partners in The Hague, said by e-mail. “The main risk remains the Chinese economy. This is the biggest driver of global trade and emerging markets, and an inability to stabilize will drive emerging-market GDP lower again."

The direction of currencies also remains a "big threat" for equities, he said.

Stocks

The MSCI Emerging Markets Index rose for the first time in four days and was up 0.2 percent at 792.94 as of 10:30 a.m. in London. The gauge retreated 17 percent in 2015. Chinese shares traded in Hong Kong and equities in Brazil, Colombia, Turkey and Egypt were among the biggest decliners this year. The measure is valued at 11 times projected 12-month earnings. The MSCI World Index fell 2 percent this year and is valued at a multiple of 16.

All 10 industry gauges in the developing-nation index fell during 2015, led by declines of 20 percent or more in energy, financial, telecommunications, utility and material companies. On Thursday, the final trading day of 2015, all but two of the measures rose.

The Hang Seng China Enterprises Index was little changed after falling 1.3 percent on Wednesday, paring this year’s decline to 19.4 percent. Markets in South Korea, Philippines, Indonesia and Thailand are closed for holidays.

Turkish Turmoil

The Borsa Istanbul 100 Index fell 0.4 percent on Thursday and is down 15 percent in a year marked by political turmoil and a deterioration in security due to the conflict in neighboring Syria. The Dubai Financial Market General Index was little changed, setting its 2015 loss at 17 percent as countries in the oil-exporting Gulf Cooperation Council suffered the brunt of the slump in the price of crude. The Tadawul All Share Index in Riyadh slid 17 percent this year, the most since 2008.

“China’s slowdown, combined with the fear of Fed rate hikes as well as price weakness in commodities led to quite a bad year for emerging-market investors who didn’t look for a niche market,” Attila Vajda, managing director of Project Asia Research & Consulting Pte, a Singapore-based advisory firm, said from Ho Chi Minh City. “Investors should cherry pick and not treat all EM markets as being the same.”

Currencies

In Asia, currencies weakened this year mainly due to capital outflows in anticipation of higher U.S. interest rates and the impact from China’s economic slowdown. Malaysia’s ringgit led the losses with a 19 percent decline as the slide in Brent crude also cut government revenue for the region’s only major net oil exporter. It was the worst annual performance since 1997. Indonesia’s rupiah dropped 10 percent, the Thai baht depreciated almost 9 percent and South Korea’s won lost 6.3 percent. The rupiah, won and Taiwan’s dollar are forecast to lead declines in 2016.

As countries including Argentina and Kazakhstan abandoned currency pegs to the dollar, their exchange rates plunged 35 percent and 46 percent, respectively. The Brazilian real retreated 33 percent amid a corruption scandal that began at state-run oil giant Petroleo Brasileiro SA, credit rating downgrades and a political crisis that left the nation’s president facing impeachment proceedings. The Turkish lira fell for the third straight year, as did the Russian ruble, which has erased almost 60 percent of its value since the end of 2012 due to oil’s slide and sanctions over the conflict in Ukraine.

Bonds

The yield premium on emerging-market government debt over U.S. Treasurys widened 59 basis points this year to 412 on Thursday, JPMorgan Chase & Co. data show. That’s the most since 2011.

Sovereign local-currency notes delivered a loss of 2 percent in dollar terms for 2015, after gaining 4 percent last year, according to a Bloomberg gauge. The biggest returns for this year were from Nigeria, the Dominican Republic and Russia, while Brazilian and South African debt led declines.