Reuters reported that investors had begun to flee from emerging markets in recent months in anticipation of the US Federal Reserve tapering of its monetary stimulus package. The report said some countries would be able to deal with the repercussions of slower influx of capital more effectively than others. The US Federal Reserve was scheduled to hold a meeting next week where an announcement about the trimming of its quantitative easing program was largely expected.
Countries like Brazil and India that import capital to fund their spending would be hit the most by the squeeze, the report said. Those that do not depend largely on foreign capital, like South Korea and Mexico, would fare better.
Analysts said investors would need to become selective when investing in developing markets after the tapering. Emerging markets, meanwhile, would also need to work doubly hard to attract capital. Morgan Stanley strategist James Lord told Reuters what these markets needed to do. "Now they're going to have to work harder. That means reforms," he said.
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