Name’s Bond, EM Bond

Like Roger Moore’s spy roles, emerging markets deserve a fresh review. They are set for another solid run

- Ruchir Sharma

These days major emerging market leaders must be feeling the chagrin of Roger Moore, who was often criticised as the worst James Bond ever. The British actor once quipped that long after he stopped playing the iconic secret agent, he still got a bad review each time a new 007 movie came out. Now every time dire news breaks on the global economy, from rising interest rates to increasing commodity prices, pundits say “emerging markets” are in the worst spot.

Read closer, however, and the countries these critics cite are generally small ones like Zambia and Sri Lanka. Among the roughly 150 developing economies there will always be distress somewhere. But by most measures – from current account deficits to currency valuations – the 25 largest developing nations, from India to Brazil, are in strong financial shape.

● Together these markets account for 70% of the population and nearly 90% of gross domestic product in the developing world.

● They are less vulnerable to capital flight now than they were the last time global investors fled en masse in response to tightening monetary policy, during the taper tantrum of 2013.

● Compared to 2013, their current accounts have shifted from deficit into surplus, and only one in ten has a worrisome deficit – above 3% of GDP – down from three in ten.

● Foreign exchange reserves have grown from 19% of GDP to nearly 26%; currencies are on average 40% cheaper against the dollar than they were during the taper tantrum.