In the eight weeks through July 17 investors pulled $40.3bn from emerging-market bond and equity funds amid signs that the U.S. Federal Reserve may start scaling back its stimulus effort. At roughly the same time, massive demonstrations in Turkey, Brazil and Egypt shook the foundations of power in those countries. Adding to the turmoil is a slowdown in China that's affecting exports, from coal to copper to potash.
These three challenges could feed off one another and have the potential to set back some emerging-market economies well into 2014. Developing nations deprived of cheap funding from the capital markets are punished far more during downturns than rich nations with extensive social safety nets like the U.S. or Europe.
