Emerging market stocks are lagging behind those in developed economies by the most since 2013’s “taper tantrum”, as investors fret that global tightening in monetary policy will trigger a flight away from the asset class.

MSCI’s EM benchmark is essentially flat for 2021 in US dollar terms, including dividend payments. The lacklustre performance starkly contrasts with the index provider’s global gauge of DM stocks that has delivered returns of more than 20 per cent so far this year, bolstered by gains in US and European equities.

EM bonds have also fared poorly, with a fall in prices more than offsetting the relatively juicy interest payments investors earn from holding the debt. JPMorgan’s index tracking debt issued in local currency is down 8.1 per cent for the year to date in US dollar terms. A similar gauge of bonds issued in major developed market currencies is off 1.5 per cent.

Analysts warn that market…

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