(Harvest) Worsening relations with the U.S. have spurred a sharp selloff in Turkish assets and exposed economic weaknesses such as large external debt loads and rampant inflation. We see many of these problems as unique to Turkey, yet other EMs have felt the heat. We remain wary of markets with high debt and deteriorating growth, and see long-term opportunities in regions with sound fundamentals, such as EM Asia. Rising macro uncertainty, higher interest rates and a strengthening U.S. dollar have led to a modest tightening of global financial conditions. This has laid bare vulnerabilities that had, until recently been masked by plentiful global liquidity. Countries reliant on external borrowing to fund growth and large current account deficits—such as Turkey and Argentina—have suffered the most, as the chart above shows. Currencies of both have lost more than 40% against the U.S. dollar this year to date. Yet both Turkey and Argentina are relative outliers within the EM world. Many other EM countries, especially in Asia, appear healthier with improving current account balances.