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Financial divergence: How ready are Emerging Markets for global financial tightening?
The Emerging View
15 May 2014
Contrary to popular perceptions, Emerging Markets (EM) countries have been deprived of their fair share of global finance. A disproportionate amount of global capital has gone to developed markets, especially since the onset of QE. EM financial market ‘divergence’ from developed financial markets has taken place in spite of evidence of EM’s strong and continuing economic convergence with developed markets. The fact that EM countries have not gorged themselves on cheap money may ultimately prove quite beneficial to EM. After all, past deprivation means that EM will not face as great fundamental challenges in adjusting to a smaller global financial pie as developed economies.