Why emerging economies will (again) pass the resilience test

Since the change of tack at the Federal Reserve in May, emerging markets have faced significant outflows of around $50bn from both equity and fixed income investors. A number of things can explain this, including better opportunities in developed markets, fears of a Chinese slowdown and social unrest in several countries throughout June (Brazil, Turkey, Bulgaria and Egypt, for example). While we believe current account deterioration and the associated funding issues do exist, it mostly affects five countries (India, Indonesia, Brazil, Turkey and South Africa) whose currencies have dep...