In 1994, the US Federal Reserve increased interest rates. The eventual effect of this was the Asian crisis of 1997, then the Russian crisis of 1998 and the collapse of LTCM. History does not repeat itself, once said Mark Twain, but it does rhyme.

Did you hear that? It is the markets rhyming again.

This week the OECD said: “In East Asia…combined nonfinancial corporate and household debt has increased in several countries, reaching 130 per cent of GDP in China and Malaysia in 2012. For the East Asia region as a whole, private debt has increased by 19 percentage points of GDP since 2007, while in Latin America it has increased by 9 percentage points. Household debt (only by deposit-taking corporations) in Thailand has risen 15 percentage points since 2007 and now stands at 63.4 per cent of GDP. Total household debt is estimated to be about 77 per cent of GDP in Thailand and almost 80 per cent of GDP in Malaysia.”

Countries across the emerging world where private debt is either around 100 per cent of GDP or even greater than this amount – and listed in order of size of debt to GDP – include: Thailand, Panama, St Lucia, Vietnam, Malaysia, South Africa and China.

Three countries stand out with excessive level of foreign debt. They are Papua New Guinea, Latvia and the Seychelles.

The World Bank said: “Public debt levels are high and proving difficult to manage in countries such as Cape Verde, Egypt, Eritrea, Jamaica, Jordan, Lebanon, Pakistan, and Sudan.”

But as markets panic, and emerging market debt becomes the thing they fear most, expect fundamentally strong economies to be punished too. The markets are like that. In times of either euphoria or panic they don’t tend to discriminate between sectors or regions.

That means opportunities may emerge. Watch out for the countries that make up the Pacific Alliance Trade Bloc, some countries within South East Asia, and the so-called TIMPs – Turkey, Indonesia, Mexico, and the Philippines – in particular.

© Investment & Business News 2013