Investment risk: What the fragile five also share

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Brazil, India, Indonesia, South Africa and Turkey have more in common than macroeconomic numbers.

Morgan Stanley’s currency research document published last summer, entitled ‘The fragile five’, has become the blueprint for an emerging market sell-off. The fragile five – Brazil, India, Indonesia, South Africa and Turkey – has become the bearish counterpart to the Brics bull of the previous decade.

The common factors to which the research draws attention are high inflation, large current-account deficits, challenging capital flow prospects and potentially weak growth. But these are just outward signs of...