In general, EM stocks like inflation (they are dollar debtors and commodity exporters) and dislike higher real interest rates. The chart shows a close positive relationship between inflation expectations expressed in the Treasury market and a loose but negative relationship between the so-called real yield (the yield on Treasury Inflation Protected Securities). In recent months, though, the correlation between real interest rates and overall emerging market returns has disappeared. That’s because reflation has buoyed the Latin American markets, and Chinese growth has driven higher returns in Asia. The Asian emerging markets are less indebted in dollar terms and less vulnerable to higher interest rates. That makes Asia a safer bet than Latin America: if and when the commodity price recovery runs its course, Latin American commodity exporters will be vulnerable. As long as China’s economy continues to expand and China keeps pouring investment into Asian infrastructures, Asian growth is likely to continue.