Emerging markets – once the darlings of international bond investors amid low yields and paltry growth in the developed world – now seem a lot less enticing. 

China is decelerating, India’s economy is expanding at its slowest pace in a decade, and Brazil, Russia and South Africa are barely growing at 2%. Recent protests in Turkey, not to mention turmoil in Egypt, have brought political risk back to the fore. On top of this, the US is on the verge of tapering its huge quantitative easing (QE) programme, which has been responsible for billions of dollars of portfolio flows into emerging markets.

The consequences of all these issues are already becoming apparent. Major emerging currencies took a hammering between the start of May and mid-August – India’s rupee and Brazil’s real each depreciated 12% against the dollar, while local bond yields spiked in many cases.

Yet it would be wrong to write off emerging markets. The factors that made them so attractive to global investors in the past two decades mostly remain. Their economic growth is still well above that of the developed world, their populations are younger and they have much lower debt levels.

They have also learnt from previous crises and generally have far better buffers today to cope with potential shocks to balance of payments. Take Mexico, for example. It has $170bn of foreign exchange reserves, almost six times the amount it had going into the 1994 Tequila crisis.

Moreover, the fact QE is on the way out is ultimately a boon for emerging markets, in that it suggests the US's economy is on the rise. Should that recovery continue, it is difficult not to see developing economies benefiting from bigger trade and financial flows with the US.

Over the next 12 months, volatility could well become commonplace in emerging financial markets. There will be greater differentiation among investors between different countries; those with wide current account deficits and large foreign holdings of their bonds will be especially vulnerable. But in the long term, the underlying strengths of emerging economies will likely prove that they can thrive even without a flood of cheap money from the world’s biggest economy.

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