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News Link • Economy - International

TOO MANY FIRES BURNING: Why Emerging Markets Are Tanking

•, Matthew Boesler
There are a combination of factors behind the sell-off, including the slowdown in China, unwinding of carry trades, domestic political issues, and monetary policy of the world's biggest central banks.

But the escape from emerging markets (EM) has been brewing for a while.

Investors have been shifting out of EM since mid-2013, when long-term interest rates began rising in the U.S. as the Federal Reserve primed the marketplace for a long-awaited reduction in monetary stimulus.

Much of the inflows into EM assets in recent years were predicated on a search for yield in the absence of any in developed markets. But as U.S. interest rates have risen in recent months, there has been less and less of a justification to be invested in EM, and those flows have begun to reverse.

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