Trouble in Emerging Markets

A strengthening dollar, rising interest rates, tightening liquidity and a surge in oil prices - all are combining to create a toxic atmosphere for EM assets

EM (emerging market) assets have had a tough year to date. Whether it be currencies, rates or equities many large EMs are under pressure. We have equity markets in Brazil, Turkey and China down by 15-20 per cent. EM currencies, including now the Chinese renminbi, remain stressed. Even in India, while the headline benchmark equity indices do not show much damage, scratch a little below the surface and the damage is apparent. The mid-cap equity indices are down 20 per cent, in dollars, with many individual stocks declining by 30 per cent and more. There is serious performance pressure being