Where to hide in an emerging market rout

EMERGING markets follow the biblical rule of seven lean years followed by seven rich ones, according to Harvard University economist Jeffrey Frankel. Every 15 years, a crisis erupts.

By that measure, a rout is almost due. Developing economies have seen six years of brisk credit growth, fuelled by cheap global money. Private and public debt has ballooned. Since the end of 2007, the surge has been 90 per cent of GDP in China, 30 per cent in Brazil, and 40 per cent in the Czech Republic.

These types of excesses typically stop abruptly. Seven years of frenzied petrodollar recycling in Latin America ended with a debt debacle in 1982. A seven-year boom preceded the 1997 Asian crisis.