Investors Continue to Withdraw Funds from Emerging Markets

With expectations mounting that the Federal Reserve, led by its departing chairman Ben S. Bernanke, may soon begin to tighten its monetary spigot, Istanbul’s skyline could well be a harbinger of an emerging-market bust brought on by unpaid loans, weakening currencies, and, eventually, the possible failure of developers and banks.

This week, stocks and currencies in several developing Asian markets, including India, Indonesia and Thailand, have been hit hard. Global investors continued to withdraw funds from emerging markets, as interest rates edge up in anticipation of the Fed’s move to reduce its stimulus efforts in the United States. Indonesia’s benchmark index, which fell 5 percent on Monday, dropped 3.2 percent more on Tuesday. India’s stock market fell 0.3 percent after sliding 5.6 percent in the previous two trading sessions.

Some analysts see it as the markets reacting to an end—real or perceived—of the Bernanke boom. “What we are witnessing is a huge bubble, a Bernanke bubble if you will,” said Tim Lee of Pi Economics, an independent consultancy based in Greenwich, Conn.


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