In 2010, financial advisor and stock analyst Marcio Silveira went to see some old friends at a conference on investing in Brazil hosted by the New York Society of Security Analysts. He had grown up in Brazil—his father was a financial analyst and they had dinner table discussions about the markets.

He remembers that people at the conference were “super excited” about the country—its structural reforms and improved fiscal policies. “Brazil is on track to see economic growth that could rival India and China,” said the conference press release.

“They were talking about Petrobras in the same league of Exxon,” says Silveira, “and they were talking about valuations sometimes being even higher than the developed markets here because you have not that much risk and maybe better growth prospects. And some questions were pretty basic coming from an audience that was very uninformed. At that point I was really scared and I felt like OK.… Maybe Brazil is too hot.”

As it happens, he said, that exuberance coincided with the top of the market. “Around the middle of 2013, there were many demonstrations in Brazil and the entire economic mood became very gloomy,” he says. Since the conference, the iShares MSCI Brazil Capped ETF has fallen some 35%.

Emerging market countries saw trillions of dollars snow down on them after the financial crisis in 2008, when investors hungering for return turned away from ailing developed markets. But in 2013, it took a couple of Fed comments to create an ugly reversal of fortune. The end of quantitative easing and hints at higher interest rates sent investors skipping away fast from the developing world. Currencies depreciated. Capital flows ebbed. Equity prices sank. In the month after the Fed made its comments on May 22, 2013, the iShares MSCI Emerging Markets ETF saw $6.6 billion in outflows, while the Vanguard FTSE Emerging Markets fund saw almost $2.6 billion spill out, according to (Both were in the top five of redemptions for the year.) In one week in June of last year, the iShares fund reportedly accounted for half of all ETF outflows.

Some $29.2 billion reportedly spilled out of emerging market funds last year.

Once tempers cooled, emerging markets changed again around February of this year, and they were doing well enough that the MSCI emerging markets index even outpaced the S&P 500 until September. But people are now worried that with fresh announcements ahead from Janet Yellen & Co., the emerging markets could be vulnerable again. After an upswing in 2014, the Institute of International Finance said that emerging markets capital inflows saw a sharp decline in inflows between August and October of this year.

The 2013 ebb was extremely punishing on India, Brazil, Turkey, South Africa and Indonesia, whose currencies Morgan Stanley called the “Fragile Five.” These countries, seen as being too thirsty for foreign nourishment for their growth plans, saw their stock markets on average fall 13.75%, according to an IMF working paper published in June of this year by authors Prachi Mishra, Kenji Moriyama, Papa N’Diaye and Lam Nguyen.

But other countries did better. The IMF report, called “The Impact of Fed Tapering Announcements on Emerging Markets,” said the countries less sensitive to loose Fed lips boasted certain fundamental strengths: “In particular, countries with larger current account surpluses, stronger fiscal balances, lower inflation and more reserves saw smaller depreciation in their exchange rates and a lower rise in bond yields. Countries with deeper domestic financial markets were less affected as the size of these markets meant that investors could move large amounts of capital outside the country or toward other domestic markets without significant changes in prices.” In addition, countries more tied to China weathered the post-FOMC volatility better, said the paper.

“These are mainly countries in the Asian supply chain.”

Silveira, once a stock analyst covering these countries and now a financial advisor, says nervous investors are often heedless of those fundamentals.

“On the strong side we have Korea, Russia, China, countries that run a current account surplus. They don’t depend on foreign money to pay their bills. And they have a very high level of reserves. … But then you see countries that are a lot more vulnerable like Turkey, South Africa, Brazil, India that run current account deficits, and they have relatively lower levels of reserves.”

“Foreign economies (and their equity markets) that are often hit worst when interest-rate shocks occur are those with large current account deficits (countries that are importing more than exporting,)” says Carl Macko, president of Synergy Capital Management in Atlanta. “Countries with high external borrowings have to pay back these creditors with a depreciating currency (due to an outflow of capital to countries with higher real interest rates).  However, external borrowings relative to reserves are much smaller today than during the Asian financial crisis of the 1990s. Emerging economies (especially Latin ones) have five to 10 times as much in foreign reserves to pay creditor nations.”

Still, it seems, these stocks tempt hot money and provoke extreme temperaments—reactions either over-exuberant or too fraidy cat. The stocks are volatile, even fans admit, but that’s why they promise a premium for long-term investors. The point is having the guts to stick it out year in and year out.

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