Masic Forum

Not long ago there was a broad consensus that this was to be the emerging economies' century. More recently and due to the risk aversion shocks, contraction in global liquidity, a reflow of capital out of emerging economies and back to the developed markets, as well as structural economic concerns, emerging economies have been less favored. Few pondered that the huge inflows of capital during the 2006-2012 period left EM vulnerable to a reversal of financial policy in the US. Conditions have changed for EM as China slows, the Fed eyes QE tapering, and DM strengthen. Global investors appear to be rethinking their allocation to EM, and capital outflows can be dangerous for EM economies and assets. The two factors that have supported EM economies and markets for years has been strong Chinese growth and highly accommodative US monetary policy