As emerging markets “recouple”, could the Gulf be a safe haven?

Investors are losing faith in the emerging world's invulnerability. However, the Middle East has proved relatively resilient. Will the region be able to weather a US recession?

In 2007, faith in "decoupling" the notion that emerging stockmarkets and economies could shrug off a sharp US slowdown was a mainstay for world markets. But since world markets peaked in late October, the Bric markets (Brazil, Russia, India and China) have declined by over 22%, while the S&P is down by less then 15%.

Emerging markets overall have lost around 15% this year, while the S&P is down about 9%. So it seems emerging stockmarkets are still closely correlated with their developed counterparts, while investors are realising that "US weakness is likely to persist and that everybody will be affected in one way or another", as Gabriel Stein of Lombard Street Research told the FT.

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