In 2 Charts, Here’s Why An Emerging Markets Crisis Would Be Worse Than Ever Before

In 2 Charts, Here’s Why An Emerging Markets Crisis Would Be Worse Than Ever Before


FEB. 3, 2014, 7:32 PM 3,381

In recent weeks, we’ve seen a rout in emerging markets as investors have been pulling out of stocks, bonds, and currencies in these regions.

Many EM countries rely heavily on external financing to balance their accounts. As the Federal Reserve tapers its quantitative easing program and makes steps towards tightening monetary policy, experts fear that capital flows could reverse as interest rates rise. This would cause massive strains in these regions.

Some fear that an EM crisis this time around could be much worse for the world than past EM crises like the Asian financial crisis of the late 1990’s. This concern is largely due to the amount of world economic activity attributable to the EMs.

Wells Fargo’s Jay Bryson offers these two charts illustrating the rapidly growing importance of these markets.

First, the developing world’s share of global GDP has climbed from 37% in 2000 to 50% in 2012:


Wells Fargo

Second, developed economy exports to developing economies has climbed from 20% in 2000 to 35% in 2012.


Wells Fargo

Bryson, actually, isn’t overly concerned about a major crisis just yet.

“We do not believe the recent volatility in emerging markets will lead to a collapse in economic growth in the developing world à la 1997-1998 because the economic fundamentals in the developing world are generally not as weak as they were in the mid-1990s,” he wrote.

But if these fundamentals deteriorate significantly, we have ample reason to worry.

Read more:

About bambooinnovator
Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (, the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: