This week Argentina’s currency, the Argentinian peso, plummeted in value as the Government made a plea to the International Monetary Fund for assistance, alarming investors and hurting the peso and the country’s bond prices.
The Turkish lira has been heavily jettisoned by traders with economic confidence in Turkey had reached its lowest point since March 2009.
Andrew Brenner, of National Alliance, told CNBC: “This is not over by any means.
“The longer the Fed takes easing away, the more they’re tightening, the more trouble for emerging markets, and we haven’t seen the worst of it.”
A significant factor to hit emerging markets is the US Federal Reserve’s decision to take away quantitative easing, making it more expensive to borrow money from US banks.
They have hiked up interest rates, which can lead investors to pull their cash out of riskier markets, like Turkey and Argentina, to take advantage of better returns in stronger economies.
The rate hikes have driven up the value of the dollar versus other currencies, making it more expensive to repay dollar-denominated debt.
Analysts say Argentina was especially vulnerable to the changes because they are reliant on other countries.
William Jackson, chief emerging markets economist at Capital Economics said: “Their economic vulnerability is really large.
“They have a quite weak domestic base, a large reliance on imports.
“They’ve had a recession every two years for the past six years.”
Mr Jackson said Argentina’s dependence on foreign capital flow, and their large foreign currency debt, were also factors.
Another disruptive influence are the ongoing trade wars between US President Donald Trump’s administration and China.
The US has imposed tariffs on steel and aluminium globally and on £38.6 billion ($50 billion) of Chinese goods.
The president may consider tariffs on another £154 billion ($200 billion) in Chinese goods in September.
China’s ambassador to the US hit back by saying China would not be intimidated, demanding: “a process of goodwill for goodwill and good faith for good faith.”
Some analysts worry this mix of factors could be a perfect storm of financial trouble for emerging markets generally.
Win Thin, senior currency strategist at Brown Brothers Harriman said: “Argentina got caught wrong-footed at a bad time for EM.
“We’re in an environment where everyone is negative on EM.”
Mr Thin said the scene was set for other such financial collapses, pointing out: “US rates rising, trade tensions, China slowing — for me that’s a negative backdrop for EM.”
Economists from J.P. Morgan responded to such fears by assuring analysts the money woes in Turkey and Argentina do not necessarily point to a contagion of emerging markets.
The analysts wrote: “The forecast continues to assume that the spillover from these countries to the rest of the EM will be fairly limited.
“Nonetheless, financial conditions have tightened in the remainder of the EM this year and it is hard to know whether this is fully incorporated in our forecast for this group.”
Argentina’s inflation rate is now more than 30 percent, and Turkey is expected to release new inflation data next week.