“The five markets with most significant current account deficits – India, Brazil, Turkey, Indonesia, South Africa – constitute 9% of world GDP and less than 7% of world equity market cap – foreign banks’ exposure to them seems to be small – hence unlikely to derail global growth, and global equities.” (Goldman Sachs)
“In the week ended November 13, investors pulled $4.7 billion out of emerging-market equity funds, marking the largest outflow from the asset class in 20 weeks. Meanwhile, EM debt funds saw $1.8 billion in redemptions — the most in 10 weeks.”
Federal Reserve’s talk about tapering quantitative easing marked the beginning of the market sell off in Emerging Markets.
Many Emerging Market countries have been financing huge trade deficits with artificial free Money from Developed Markets and now the flow of Money is reversing. A negative side effect of QE.
The development is clearly negative.
Capital leaving Emerging markets. Raising money in global credit markets probably won’t be that easy going forward.