Hurricane hits the Balkans

Investors in southeast Europe are facing a "hurricane", as FAZ.net puts it. Having risen sharply over the past few years, the region's markets are now doing exactly the opposite: Romania's BET index has lost 32% from last year's peak, Bulgaria's BG 40 around 40%, and Serbia's Belex more than 50%; Turkey is down by around 30%.

The prospect of years of fast growth as these economies converge with the EU underpinned the bull runs, but this long-term factor is now on the back burner. Political upheaval in the Balkans has soured the mood of late, but, more importantly, now that fear has eclipsed greed in global markets, investors have been concentrating on these countries' economic weaknesses.

One problem is high inflation, with Bulgaria and Serbia leading the pack; prices are rising by 12% and 10% respectively. Moreover, the area has some towering current-account deficits, making these countries vulnerable to outflows of foreign capital as global investors become more risk averse.

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Bulgaria's deficit is an eye-popping 20% of GDP, while Serbia's is 17%. The slide may not end soon: not only is the region home to some of the riskiest emerging markets, but valuations still aren't cheap.