As the emerging market meltdown accelerates, plunging half of EM equity bourses into bear market territory and wreaking unspeakable havoc on currencies from LatAm to Asia-Pac, analysts and commentators alike have scrambled to find historical analogs that can serve as a guidepost when assessing the damage and, more importantly, predicting where things go from here.
One historical episode that’s received quite a bit of attention in the wake of the yuan deval is the Asian Financial Crisis of 1997/1998 and indeed, FX strategists from across the bulge bracket have done their best to catalogue the similarities (e.g. low real rates, increasing debt, exogenous shock factor, commodity transmission mechanism, similarities between Japanese and Chinese REER appreciation in the lead up, etc.) and point out the differences.