From turbulence to tranquillity: are EM markets now too complacent?

After a choppy 2013, financial markets have turned optimistic over the outlook for EMs in recent months. In many ways this makes sense. We were always of the view that last year’s concerns that Fed tapering – and ultimately tightening – might trigger an EM-wide crisis were overdone. However, by the same token, there is a danger that the markets have now become too complacent. While we see little danger of a systemic crisis engulfing the entire EM world, risks have built in a number of economies.