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(Bloomberg Business) — Morgan Stanley called them the Fragile Five.
Brazil, India, Indonesia, South Africa and Turkey were the quintet of countries that suffered through a market rout two years ago after the Federal Reserve initially signaled it would reduce monetary stimulus — the so-called taper tantrum.

As the first U.S. interest-rate increase in almost a decade approaches, the health of emerging-market economies has become more of a mixed picture. The Fragile Five won’t necessarily rise and fall together. India reduced its trade deficit and slowed inflation under new political leadership. Economic initiatives in Indonesia have had varied success, while progress in the remaining three countries has been limited.

Colombia, Russia and Peru have seen their growth slow since the taper tantrum. Morgan Stanley ranked them last month as the next group that’s most vulnerable to rising global interest rates.
Here’s a look at how things have changed in emerging markets since the turmoil of May 2013:
Current Accounts

India has cut its deficit to 1.4 percent of gross domestic product from 5 percent in 2013, the biggest reduction among the major emerging markets. While the deficits in the broadest measure of trade in goods and services in Turkey and South Africa also declined, they still stand at more than 5 percent of GDP. The shortfalls in Brazil and Colombia widened as commodity prices fell, and Indonesia still has the largest deficit in the region.

“India has made the most progress,” said Ed Parker, head of the Europe, Middle East and Africa sovereign group at Fitch Ratings. “In other countries, it has been more mixed.”
Borrowing Costs

Higher interest rates help lure foreign capital. On this front, Colombia, Russia and Turkey are less attractive with inflation- adjusted benchmark rates below zero. Peru’s real cost of borrowing dropped to 0.2 percent from 1.8 percent in May 2013. That compares with South Africa and India, where rates have turned to positive, while the benchmark for Brazil stands out at 5.1 percent, the highest among the world’s biggest economies.
Growth

With exports languishing, emerging-market growth is failing to gain momentum as Brazil and Russia slip into recession and China is growing at the slowest pace since 1990. Developing-nation economies are set to expand 4.3 percent this year, the least since 2009, according to the International Monetary Fund.

“Emerging markets are not healing well,” said Bhanu Baweja, UBS AG’s London-based head of emerging-market cross-asset strategy. “There’s no improvement in earnings, exports and foreign direct investment. It’s not clear they’re moving towards promoting more productivity growth.”
Debt Exposure

Turkey’s short-term foreign-currency debt is almost four times its dollar reserves, the highest among major economies, according to Morgan Stanley. Malaysia comes second, followed by South Africa.
In the local-currency bond market, foreign investors hold 59 percent of Mexico’s outstanding debt, the most among developing economies, according to Bank of America Corp. Peru, Malaysia, Poland and Indonesia are also exposed with overseas investors holding at least 39 percent of their credit.
A combination of weak current accounts, high foreign ownership in local debt markets and a large debt burden can “destabilize a country very quick,” said Sergey Dergachev, a money manager at Union Investment Privatfonds GmbH.

To contact the authors on this story: Ye Xie at yxie6@bloomberg.net Lyubov Pronina at lpronina@bloomberg.net To contact the editors on this story: Nikolaj Gammeltoft at ngammeltoft@bloomberg.net Bob Ivry at bivry@bloomberg.net