Only a year ago sentiment about emerging market equities was overwhelmingly optimistic. Today pessimism is rife, though not yet uniform. On the S&P Global Broad Market Index emerging markets were down 17.6 per cent in the year to July 31, while overall global markets were off only 6.7 per cent. What is it that has caused emerging markets to submerge?

Part of the problem is that expectations have been pitched too high. The emerging markets had a great crisis. After being badly hit by a capital exodus and credit crunch, along with a devastating collapse in world trade, China, India and Brazil in turn staged an astonishingly robust bounce back, quickly followed by others.

An impressively prompt fiscal and monetary response drove the recovery. Many larger economies also enjoyed the stabilising benefit of substantial currency reserves and lowly leveraged corporate and household balance sheets, reflecting the lessons learned in the Asian crisis of 1997-98. They thus escaped the debilitating impact of deleveraging that has marked the anaemic recovery in the developed world.