战略与国际研究中心-Turkey-Risks-Escalate_-What-It-Might-Mean-for-Other-Emerging-Markets_2页_379kb

Global Macro Views - EM Contagion Summary

Core Content

This document outlines the Institute of International Finance (IIF)’s analysis of emerging market (EM) vulnerabilities and the risk of contagion across the broader EM complex. It highlights the growing concerns about EM exposure to external shocks and the implications of non-resident portfolio inflows.

Main Points

• Rising EM Risk: The IIF has been warning about increasing risks for emerging markets, especially for Argentina and Turkey, due to a combination of factors such as rising G-3 interest rates, trade tensions, and currency devaluations.
• Contagion Potential: The document emphasizes that non-resident flows to EM have been unusually strong in recent years, leading to a concentration risk. This concentration risk can act as a conduit for financial contagion, spreading vulnerabilities across the EM spectrum.
• Currency Depreciation: The Turkish Lira has experienced a sharp sell-off, which the IIF views as an undershooting of fair value, similar to what some EMs face during "sudden stops." This has contributed to broader EM currency depreciation compared to the Dollar.
• Historical Comparison: Non-resident portfolio flows to EM rebounded sharply after the 2015/6 China devaluation scare, reaching levels comparable to those seen before the 2013 taper tantrum. This suggests a potential for similar volatility in the current environment.
• Late Cycle Flows: The inflows to EM are considered "late cycle," meaning they follow years of strong capital inflows driven by unconventional monetary policies in the G-3 countries. This has led to a concentration of flows in specific markets.
• Vulnerable Countries: The IIF identifies several countries as particularly at risk due to their exposure to concentration risk. These include South Africa, Indonesia, Lebanon, Egypt, and Colombia.

Key Information

• Exhibit 1 illustrates the sharp decline in the Turkish Lira, highlighting the impact of current account deficits and the subsequent currency depreciation.
• Exhibit 2 shows that other EM currencies have also declined against the Dollar, reinforcing the idea of broader EM vulnerability.
• Exhibit 3 compares the strength of portfolio flows to EM before the 2013 taper tantrum and after the 2015/6 China devaluation, indicating a similar pattern of inflows.
• Exhibit 4 demonstrates the skewing of inflows toward certain countries, including Argentina, Lebanon, Egypt, Colombia, and Indonesia, emphasizing the concentration risk.
• Exhibit 5 evaluates the speed of non-resident portfolio inflows, showing that several EMs have experienced rapid inflows, similar to the pre-2013 taper tantrum period.
• Exhibit 6 focuses on the composition of inflows, distinguishing between "hot money" and more stable foreign direct investment (FDI), and again flags the same countries as vulnerable.

Conclusion

The IIF continues to highlight the heightened vulnerability of emerging markets, driven by the concentration of non-resident portfolio inflows and the potential for financial contagion. Countries such as South Africa, Indonesia, Lebanon, Egypt, and Colombia are particularly at risk, and the document serves as a warning about the possible consequences of continued exposure to these flows.