What Happens in EM Stays in EM Says Goldman

The latest selloff in emerging markets may have spurred fears of a contagion to developed markets, but what happens in emerging markets mostly stays in emerging markets, Goldman Sachs said.

“Periodic spillovers from portfolio adjustments are more likely to lead to short-lived pressures – as volatility breeds volatility – than longer-lasting ones,” Goldman said in a note. “We view the recent declines as an over-reaction,” it added.

In the wake of the Federal Reserve’s decision Wednesday to further taper its asset-purchase program, U.S. and Asian equity markets fell sharply, extending recent losses.

Asian currencies headed back toward recent lows against the dollar and the Turkish lira slipped 0.2 percent to 2.26 to the dollar, after strengthening Wednesday on a sharp hike in Turkish interest rates a day earlier.

via CNBC

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