Be Very Afraid: “The 3 EM Debacles” Loom, HSBC Warns

• Be Very Afraid: “The 3 EM Debacles” Loom, HSBC Warns
  by Tyler Durden, www.zerohedge.com  
  As the emerging world continues to wrestle with a by now familiar set of problems including falling commodity prices, a decelerating China, the threat of a Fed hike, and, importantly, idiosyncratic political risks, the attendant underperformance might well lead you to wonder if this is perhaps “the time for courage” (to borrow a Gartman-ism).  In other words, some might be thinking that now is the time to BTFD in either EM FX, equities, or credit. 
  –
  Of course we would note that as bad as the picture is now – and it’s pretty bad – things can always, always get worse especially given the fact that two EM darlings and one key emerging Asia nation all face intractable political crises, a situation which increases the potential for some manner of black swan or tail event to come calling.
  –
  As a reminder, Brazil needs desperately to find some kind of (lasting) compromise between President Dilma Rousseff and house speaker Eduardo Cunha lest the government’s utter inability to negotiate on budget reforms should end up shattering any last vestige of confidence the market might have in the country. 
  –
  Meanwhile, Turkey is mired in a civil war of its own making and protracted periods of violence, terrorism, and ethnic feuding simply can’t coexist with a strong economy forever. 
  –
  Finally, in Malaysia, PM Najib is at risk of seeing his career and legacy crumble before his very eyes as he struggles to explain how $700 million from the country’s embattled development fund ended up in his personal bank account.
  –
  We mention those examples because the BRL, the TRY, and the MYR have performed miserably, but as you can see from the above, the political risk factors are very real indeed which should give one pause before reaching out to catch the falling knife and which should also underscore the importance of making a concerted effort to understand the intersection between finance and politics before placing bets on a whim. 
  –
  But make no mistake, at its most basic level, this is a story about the fundamentals and the fundamentals for EM are quite simply a disaster:
  –
  read more.

end