Emerging markets can add summer 2018 to the unhappy list of sell-offs that have made them less lucrative than US stocks over the past decade. Yet the recent brush with bear market status should not be regarded as evidence of a systemic crisis. Dollar strength has marked a dividing line between the US and the rest of the world. But the countries whose currencies, bonds and stocks are most affected are those whose problems were already well-known and largely self-created. The Argentinian peso and Turkish lira fell to record or near record lows last week. Both economies rely heavily on foreign funding to fill gaps left by budget deficits. Argentina has deluged credit markets with bonds issued at high yields since 2016, drawing in some $100bn. Turkey has compounded its deficit and inflation problems with an insistence on keeping rates low. It makes sense that the cost to insure against Turkish default, measured by five-year credit default swaps, should reach a decade high. There is less...

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