Worries in emerging markets are coming back into the picture
First, we had Argentina. Then, there was Turkey - followed by to a lesser extent Indonesia and potentially India. And now, you can add Brazil into the mix as well.
Are we starting to see a domino effect? Or is this more localised to each country on its own?
But one thing is definitely clear. A stronger dollar and a market re-positioning due to higher US interest rates is not going to bode well for emerging markets. And that has been part of the story that we're seeing right now.
Today, the ZAR is starting to feel the pinch too. It is the weakest performing currency in the emerging markets space, with investors unconvinced that the central bank will raise rates to support the currency - and this week's poor growth figures certainly didn't help either.
A collapse in the emerging markets space is still highly unlikely at this point, but signs like these must not be taken for granted - if previous financial crises are to go by. The fact that there remains such a gap between the Fed's tightening cycle and that of central banks in Asia is a clear sign that the pain now may extend further if the Fed continues to turn a blind eye on global developments.
Should we venture down that path, the real question in the coming months will be, "when do we reach a breaking point?".
