Because the current breed of market participants are hard-wired as binary – either risk is “on” or “off”, market volatility could be amplified depending on which of the earlier impulses would  BIS central bankers’ speeches  1  be stronger at a point in time. Capital flows could shift from AEs to EMEs, in general, and more strongly into specific EMEs, in particular.
And depending on the news, we may see a rebalancing within the EME space, a return of flows to AEs, and the cycle could continue where funds would flow back to EMEs. EME policy focus: how do we guard against the new wave?