While the ongoing US/China trade tensions continue to weigh on investor sentiment, the sequence of country-specific stories (Turkey, Argentina and South Africa) contributed to the almost indiscriminate repricing of EM assets, starting with plummeting EM currencies. The causes of the collapse seen in the currencies’ values in these countries are different (need to apply for IMF aid for Argentina; balance of payment crisis in Turkey, accelerated by the perceived lack of independence of the central bank; the start of an economic recession in South Africa, with additional concerns regarding the land reform plan). However, what all these countries had in common are some areas of vulnerability, starting with government deficits and dependence on foreign funding, often denominated in USD, which resulted in a higher exposure to multiple headwinds that are surfacing in this late phase of the cycle.

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