The crisis in Ukraine has so far had only a small impact on most emerging markets. Although EM equities have fallen in recent days as the crisis has intensified, they have still risen over the past month. The clear exception, other than the Ukraine itself, has been Russia, where the equity market has underperformed in recent months and has fallen by 5% in the last week. Russia and Ukraine aside, it doesn’t come as a great surprise that the crisis has not triggered broader market panic. After all, we do not think it poses much threat to the economic recovery in the rest of Eastern Europe, let alone to growth in other EM regions. Instead, developments in China and US Fed policy are likely to remain the key drivers of moves in EM financial markets.
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