Hong Kong — With MSCI’s flagship emerging market equity index having dropped a fifth from its peak in January, investors fear further pressure will spark broader contagion. Emerging economies are being challenged by a strengthening US dollar and the scaling back of ultra-loose monetary policy in developed markets, but parts of Asia are proving more resilient. The divergence in fortunes shows emerging markets, despite the umbrella label, are taking different paths. Among the most exposed emerging economies are those with current account deficits that rely on foreign capital. When US rates rise, attracting foreign capital into developing economies is a harder feat. That danger has spurred a fall in Turkey’s lira and Argentina’s peso. In turn, other currencies, from the South African rand to the Mexican peso, have been hit as investors have retreated from EM. Such is the pressure, Turkey’s central bank was forced to take the dramatic measure of raising interest rates to 24% on Thursday...

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