The resilience of emerging markets is being tested against the global economic turmoil as external financing conditions tighten and policymakers face rising inflation, according to a report by the International Monetary Fund (IMF).
The Global Financial Stability Report also said emerging markets' policies addressing rising inflationary pressures are coming under increased scrutiny.
Emerging markets have remained relatively resilient to the credit crunch to date, however as the crisis continues there are clear signs that investors are now becoming more cautious about adding to positions, the report said.
"Emerging markets equity markets have marginally underperformed mature market equities since the recent mid-May peak."
Outflows from emerging market equity funds have been concentrated on Asian markets where inflation and downside growth risks are most elevated, the report said.
"As commodity prices rise, risk appetite wanes and external financing conditions tighten, markets have become increasingly discriminating with regard to the risks posed by large external imbalances."
