Dimitra DeFotis, Barron’s, July 23, 2015

Emerging markets appear headed for a “painful catharsis” despite two rounds of debt unwinds. That’s the opinion of Morgan Stanley’s global economics team, which expects eventual support for growth and higher asset prices. Morgan Stanley’s illustration of the trends indicates Russia’s economy is the most structurally challenged, followed by Brazil, South Africa and China, and then Turkey, Thailand and Korea. The triple play is 1) the unwind of domestic emerging market credit (which hurts emerging market growth directly), 2) the unwind of China’s leverage (which hurts emerging market current accounts) and 3) the end of U.S. quantitative easing via higher real rates, and dollar strength which hurts emerging market capital accounts). […read more]