Stephen Jen, managing partner at SLJ Macro Partners LLC, has an ominous message: “Mind the falling BRICs,” he wrote Monday, referring to Brazil, Russia, India and China–once the darlings of the investment world.
He said the growth of emerging markets in recent years has been over-dependent on cheap liquidity. Now that is drying up, emerging markets’ wobbly bits will be all the more visible. “The cumulative capital inflows in the past decade have been huge, driven by questionable rationale. The risks of a ‘sudden stop’ in capital inflows were very high and rising. While the economic fundamentals of the developed economies have indeed been bad, the economic fundamentals of many emerging-market countries were not nearly as good as many presumed.”