China exports and imports
A worker walks in a shipping container area at the Port of Shanghai

As the US is headed for a higher interest rate regime, Mongolia and Indonesia are likely to be more vulnerable to the fallout while India, China, the Philippines and Malaysia are better positioned, Fitch said in a statement.

According to the rating agency, sovereigns with large external funding requirements, high leverage and relatively greater reliance on foreign short-term debt will be among the most exposed to higher US interest rates.

The base case, according to Fitch, is for a gradual increase in US rates, while in the stress test it was assumed that a more rapid narrowing of the output gap and labour market slack in 2015 would lead to a sharp rise in inflation to 4.5%.

"This would result in hikes to the Fed Funds target rate to 3% by end-2015 and 5% by end-2016 - in turn causing a sharp steepening of the yield curve, financial market volatility, and a spike in spreads over US treasuries for high-yielding assets," the Fitch statement said.

The Vulnerable

In general, the major Asian emerging markets are relatively well positioned. In the rate shock scenario conducted by Fitch, only Mongolia signalled risky or stretched levels of external funding requirements and leverage.

Indonesia also indicated some vulnerability in the stress test, and was among the largest emerging markets to exhibit vulnerability during the 2013 "taper tantrum" - owing in part to its high commodity dependence.

Furthermore, it continues to have one of the highest gross external funding needs among all major Asian economies despite a modest decline in its funding requirement since then, and non-resident holdings of government debt remain high.

China's position

China's closed capital account, negative external funding requirement, and generally healthy public finances, mean that the direct risks from a spike in US rates are limited.

However, banking system-related risks linked to aggressive credit-led stimulus and a potential supply overhang in the key real estate market could make the economy vulnerable in the event of a broader global slowdown.

Many emerging Asian countries have reduced their external funding needs since 2012, and India is one such case, Fitch said.

"India's gross external funding requirement has declined since 2012, and it is likely to require a lower funding need than the average of non-Asian major emerging markets by 2015."

Sri Lanka, too, has seen a marked decline in its external financing needs, the rating agency said.

"The credit impact of these trends is positive, although Fitch views these developments as supporting ratings at their current levels rather than adding to pressure for an upgrade in the near term."

Even within the base case of a gradual rise in US rates, the external funding environment is expected to become more challenging, especially for emerging markets, Fitch said.

In this setting, policy management - particularly structural reforms that boost exports and reduce the need for foreign capital - will be increasingly relevant for the credit outlook, the rating agency said.

Currency Performance

The Chinese yuan had weakened to 6.1459 from 6.1390 following the Fed decision but has returned to 6.1374 by Friday.

The Indonesian rupiah on the other hand continued south on Friday. It is down 0.3% from prior to the Fed decision.

The Indian rupee is now 0.60% stronger from where it was before the Fed decision, though the immediate reaction was a drop to 61.22.

On Friday in early trades, the USD/INR pair traded as low as 60.70, compared to the 17 September close of 61.08.

The Mongolian Tughrik had dropped 2.3% in the first two weeks of September to 1835, and then bounced back to 1827 in the next few days. The Tughrik is still down 1.7% from the early September peak.