SINGAPORE (Sept 17): A clear divergence between emerging market and developed market performance has been observed since May, when escalating trade conflicts worldwide fuelled demand for safety and thus drained liquidity out of risky assets. The US Dollar Index, a measure of the strength of the greenback against a basket of its major peers, surged as much as 8% from April to August, creating chaos in the emerging world as capital outflow accelerated. A strong dollar exerts pressure over EM assets, both equity and currency. Over the last three months, the US dollar-denominated the MSCI EM Index fell 9.1%, compared with a 9.4% gain in the Standard & Poor’s 500 Index. The outlook remains cloudy for EM as the strong dollar is underpinned by solid economic developments and a firm rate-hike path.

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