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HindustanTimes Thu,18 Sep 2014

‘Fragile Five’, the new tag for emerging markets

PTI  New Delhi, January 29, 2014
First Published: 23:37 IST(29/1/2014) | Last Updated: 01:46 IST(30/1/2014)

Emerging markets like India, South Africa and Brazil are being described as ‘Fragile Five’ by a global investment banker for their over dependence on skittish foreign investment to finance their growth ambitions.

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The new catchphrase ‘Fragile Five’ is being used to describe markets that have witnessed economic turmoil in recent years, a rival to the term BRICs that had highlighted the long-term growth potential of Brazil, India, South Africa, Russia and China.

A report in the New York Times said the term had been coined by a research analyst at Morgan Stanley which identifies Turkey, Brazil, India, South Africa and Indonesia as “economies that have become too dependent on skittish foreign investment to finance their growth ambitions.” It said that the term has caught on as it highlights the “strains that occur when countries place too much emphasis on stoking fast rate of economic growth”.

The term is also raising pressing questions about not just the state of the BRICS economy but about emerging markets as it has become an easy for investors to voice fears on a broader emerging markets rout, propelled by runs on the Turkish lira, Brazilian real and South African rand.

Morgan Stanley currency analyst James Lord had sent out a research note last August warning of the risks within the “Fragile Five”.He and his team have been playing down his original thesis. “We have been using the term less and less in our research,” he said, explaining that responses by policy makers in these countries have worked to some extent.


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