Here Are 2 Lingering Risks That Have Emerging Market Investors Freaked Out Again

After a sharp sell-off during the early part of the year, emerging market stocks, bonds and currencies bounced back in September after the Federal Reserve decided to delay tapering its $85 billion monthly asset purchase program.

But markets are once again getting antsy in the wake of the recent FOMC statement and improving economic data, which has reminded everyone that Fed tightening is near.

The major fear is that tighter U.S. monetary policy will force investors to pull money out of the emerging markets.

"We see two risks ahead: the slowdown in global economic growth and the shift in US monetary policy, and both could trigger large capital outflows," warned Legland.

All of this comes on top of local problems in the emerging markets where many countries may be forced to tighten their own monetary policies.

India is struggling with slowing growth, high inflation, a current account deficit and a weak rupee. Its recent move to raise key rates has will have "an adverse impact on growth."

Brazil and Indonesia face similar problems.

Next year also sees elections in India, Indonesia, Brazil.

These two charts show the performance of emerging market stocks and currencies over the past two years.

This chart shows that "China, India, Brazil, Russia and Chile equity indices have been affected by global growth slowdown," according to Legland. Currency weakness has weighed on stocks as well.