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Taper tantrum two and the dumbing down of EM

Weekly investor research

27 January 2014

An unprecedented spike in correlations between US real rates and Emerging Markets (EM) spreads reflects the current taper tantrum and a general dumbing down in the way the market trades EM. We explain in detail why an impending possible default in a Chinese trust product loan poses no major risk to China. We discuss Turkey and Argentina. The situation in Argentina is ultimately of little relevance to the wider EM, because Argentina is so atypical of other countries. Turkey is more widely owned, and therefore more relevant but it too is ultimately a Turkey specific problem rather than reflective of conditions in EM more widely.

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