The Bloomberg financial conditions indicator shows what everyone who has been playing in the emerging markets is feeling, conditions in EM are not very good. The divergence between the developed and emerging world has been going on for about a year. What is notable is that the financial conditions showed much more extreme movements in 2008 in the developed world. Emerging markets in Asia were relatively much more stable. Now we are seeing bigger swings in the EM financial conditions which are consistent with capital flight. The is little reason to believe that EM stocks will find strength if finical conditions are still divergent.
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