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The difference between fragility and resilience

Weekly investor research

01 September 2014

Last year Emerging Markets (EM) clocked up 4.7% growth despite a 200bp rise on average in their borrowing costs (according to JP Morgan’s GBI-EM GD local currency government bond index) and the largest outflow since the Lehman crisis. If developed economies had experienced a similar tightening of their financial conditions it would have been extremely damaging, bordering on catastrophic, in our view. Therein lies the most salutary lesson of the past year: EM is vastly more resilient than developed economies. Developed markets are sustained by deliberate policies of asset price inflation in lieu of reforms. If you want to protect the purchasing power of your capital you should consider staying well clear of them. We provide updates on Russia, Ukraine, Brazil, Turkey, India, Philippines, China, Indonesia and Argentina.

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