Source:
https://scmp.com/comment/insight-opinion/article/1416077/easy-come-easy-go-emerging-markets-discover-us-fed-tapering
Comment/ Opinion

Easy come, easy go as emerging markets discover with US Fed tapering

During the financial crisis, the major emerging markets escaped the damage from the United States and European Union relatively unscathed. Not any more. The rout in the capital markets of the emerging economies in the past week is a reminder that many of them face serious problems from heavy government debt to large current account deficits. In a sense, it was a continuation of the mayhem they experienced during last summer, when talks about tapering by the US Federal Reserve were first raised.

Ironically, it was unorthodox monetary policy pursued by the Fed, most notably its quantitative easing, to prop up the US economy that has helped sustain the emerging markets by creating a tsunami of liquidity during the crisis. That is why tapering has sent their currencies and equity markets into a tailspin. Now that the tide is turning, some are found to be wanting. Political instability in countries such as Egypt and Thailand does not help matters.