Investors have exited emerging market funds as they wait for the impact of tapering, Reuters' Steven Johnson and Julie Haviv write.

Brazil and India are likely to feel the pain as they have to import capital to finance spending but Mexico and South Korea shouldn't be as dependent, Johnson and Haviv report. These differences will force investors to be more selective.

Johnson and Haviv interviewed Anjun Zhou, head of asset allocation at Mellon Capital Management, who put that sentiment most colorfully, saying, "When the hot money is gone, the tide will retreat and we will see who is naked on the beach."

Ray Dalio, chairman and CIO at Bridgewater Associates, a hedge fund, was quoted by Johnson and Haviv as saying that he had warned investors against getting involved in emerging markets in the near future.

Andres Calderon, who oversees $4.4 billion in assets at Hansberger Global Investors [profile] , was quoted as saying by Johnson and Haviv, "The reality is that things are going to be more challenging…But I would be very surprised if this turns into another crisis."

James Lord, Morgan Stanley [profile] strategist was quoted as saying to Johnson and Haviv, "…Emerging markets have just had to sit back and watch the capital flow in. They haven't had to try very hard to attract it. Now they're going to have to work harder. That means reforms."

To read more, click here. 

Edited by: Casey Quinlan


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