In this latest round of Emerging Market selling (like all downturns) there’s probably a lot throwing the baby out with the bathwater.
In a new report, Deutsche Bank’s Jun Ma argues that China is in a much better position than Argentina or Turkey. And yet, the report notes, China’s market has taken a beating on a similar order of magnitude with them.
As for what makes China different, the 5 reasons are:
First, compared with other emerging market currencies, China’s RMB has been the most stable in the past weeks, and it will likely remain stable in 2014.
Second, macro fundamentals are much stronger in China than in many other EM countries.
Thirdly, China’s political situation has become more stable since the change of leadership in 2013, partly due to the success of the anti-corruption program, while other EM countries, such as Thailand, Turkey, South Africa, India and Brazil, are now either experiencing serious political challenges and/or facing very uncertain election outcomes.
Fourth, China is implementing the most aggressive structural reforms in decades, while this determination is not seen in most other EMs due to political stalemate.
Fifth, China’s financial risks are being addressed by reforms.
So there you go.