By Dana El BaltajiThe turnaround in sentiment toward Turkey’s assets since September has done nothing to alter the economic fundamentals that make it the most exposed emerging market to external shocks, according to Bloomberg Economics. Inflation is the highest among peers after Argentina, well above the central bank’s target, and its projected current-account deficit is the widest, according to analysis by economists including Scott Johnson and Ziad Daoud. That said, though the lira has rallied since the central bank’s 625 basis-point rate hike in September and the country’s rapprochement with the US, it’s still down 30 per cent this year, meaning the shortfall should narrow in the future. Argentina is next most vulnerable, followed by South Africa and Egypt, according to the study. Even though currencies and bonds have held up well compared with stocks this quarter, there are a host of headwinds that could reignite a sell-off.

It’s anyone’s guess if the US and China will diffuse their trade war later this month.

Borrowing costs in the US will continue to rise and the dollar has been holding its ground. “Investors are going to need to be increasingly selective going forward,” said Hannah Anderson, a global market strategist at JPMorgan Asset Management in Hong Kong.

“Some of the headwinds that have caused market sentiment to sour are still in place.” At the other end of the scale, Thailand, Russia and Saudi Arabia are the most robust markets, the analysis concluded.