Emerging market ups and downs

Mexico

Mexico is an economic success story despite a brutal, multiyear military campaign against the country's drug gangs. Growth has been boosted by tremendous investment in the auto sector, which has climbed to be the world's third largest from eighth in 2000. Global investors hope Mexico's proximity to the U.S. (which provides U.S.-dollar income from exports) and healthier government finances will protect the country's currency.

China

China is a net exporter, with a positive current account balance, so it should remain mostly immune from the current selloff in emerging markets.

Economic growth remains strong but China is experiencing self-inflicted credit stress caused by overinvestment. Its reprieve could be temporary.

South Korea

South Korea is an emerging-market country in name only. Government finances were reformed after the Asian currency crisis of 1997 and a current account surplus of about 4 per cent of gross domestic product is expected in 2014. South Korea multinationals like Samsung would welcome some currency depreciation as it struggles to compete with Japanese exporters using the crumbling yen.

India

India has the combination of slow growth, high inflation and a big current account deficit that characterizes the weakest emerging-market currencies. The Reserve Bank of India was forced into a series of interest rates hikes beginning in 2013 as investment assets fled the country. The falling currency led to inflation as the cost of imported goods climbed, preventing interest rate cuts that could spur economic growth.

Turkey

In Turkey, political upheaval is adding to the problem of poor government finances. An attempted purge of political supporters of self-exiled Islamic leader Fethullah Gulen has created instability that threatens the government's access to global bond markets. The country's projected 6-per-cent current account deficit means it has no choice but to borrow, and heavily, to keep paying its bills.

South Africa

The South African rand would have likely sold off even without the large-scale labour action by the country's mining union. Like Turkey, the government needs to access the bond market to fund its large current account deficit. So, after Turkey's stunning interest rate hike of 4.25 percentage points, South Africa's low relative yields could not compete for global investor investment.

Scott Barlow