Which factors could prompt a resurgence in EMD inflows?

After very strong returns in 2016 and 2017, emerging market debt (EMD) has underperformed this year amid intensifying concerns around trade protectionism, bear-flattening of the US Treasury yield curve, a strengthening US dollar and idiosyncratic issues in some mainstream EM countries.

Whether we look at current account balances, international reserves, economic growth, debt and deficit levels or inflation, we see little scope for current market dynamics to expand into a deeper or more widespread EM crisis. Economic slowdown in the US would be a less favourable development for EMs, but the risk of a sudden and sharp recession is quite low, in our view.  We also believe China (as the largest contributor to global growth) holds greater significance, and its policy response towards any slowdown will be keenly observed by global markets. Can China survive the threat ...