EM slowdown in growth represents 'normalisation'

Since the taper tantrum in May 2013, volatility in emerging markets assets picked up markedly and emerging market currencies in particular took the brunt. The fallout of the Fed starting to phase out its unorthodox accommodative monetary policy resulted in risk premia trading over 100bps higher in emerging market hard currency bonds and over 150bps in local rates on average. Real effective exchange rates of commodity exporting economies have weakened over 20%. The next 'stepping stone of fear' is the expectation that the Fed will enter a hiking cycle in December and that this will have f...