Recall that during 2004-07 the US Fed slowly and steadily raised its policy rate, but fund flows to emerging markets remained intact. Long US stocks, long US dollar and short emerging markets are crowded trades. Emerging markets that run current account deficits, such as India, have seen their currencies depreciate sharply. The Bank for International Settlements too has recently underlined the widening divergences in markets, with benign financial conditions in the US and tightening conditions in emerging markets. Does that mean the party is well and truly over for emerging markets?

Source: Mint September 27, 2018 04:30 UTC