The two moons that govern the fortunes of emerging market investors are waning in unison. China’s investment spending – the lodestar for EM commodity exporters – is slowing and the US Federal Reserve is sounding more hawkish toward unwinding monetary stimulus.
The last time such a lunar aspect held sway – in early 2014 – EM market mayhem ensued. Hit particularly hard were the currencies, equities and bonds of the so-called “fragile five” countries – Brazil, South Africa, Indonesia, India and Turkey. But is history set to repeat itself this time around?
“Growth in emerging markets has been driven by Chinese demand and easy global liquidity, but both of these are now under pressure,” says Maarten-Jan Bakkum, strategist, emerging markets equity at ING Investment Management.