Emerging-market exodus

A 10% slide in emerging-markets stocks could be a signal that the bull run has come to a grinding halt.

The emerging-markets (EMs) boom looks to be over. The MSCI EM Index has slid by 10% from its early May level and EM bonds have posted a similar drop. The South African rand and the Indian rupee have fallen by 10% and 7% against the dollar respectively in the past six weeks. The exodus of capital from EMs has fuelled fear of potential crises.

Sentiment has switched largely because of the US Federal Reserve's hints that it will slow the pace of its quantitative-easing programme. That raises the prospect of higher yields as monetary policy is tightened, which would push up the dollar. So US assets have become more appealing compared to their riskier EM counterparts. Disappointing recent growth figures, the related downturn in commodities and political upheaval in some states, such as Turkey and South Africa, have also hit confidence.

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