Financial markets in emerging economies with current account deficits such as India and Indonesia have been facing increased capital outflows driven by the U.S. plan to soon end monetary stimulus.

These countries’ stocks, bonds and currencies have weakened, and their sovereign risks, measured by credit default swap premiums, increased over the past two weeks.

However, such negative effects have not spilled over to Korea, further justifying market analysts’ claims that Asia’s fourth-largest economy is decoupling from emerging economies.

Korea’s CDS premium has not changed much since early this month, with foreign institutional investors continuing to invest in domestic bonds.

Market analysts attributed the country’s decoupling to its sound economic fundamentals on the back of a current account surplus.

Economies such as China, Taiwan and Russia, which also have current account surpluses, were also little affected by the currency woes, which could potentially erupt in India and Indonesia on a scale reminiscing the Asian financial crisis in the late 1990s.

However, analysts said it was too early to conclude that Korea would be safe from these external negative factors given that its exports to Southeast Asian countries increased over the years.

Although Korea’s financial markets will not see as much volatility as those of emerging economies with relatively weaker fundamentals, the expected tapering of the U.S. quantitative easing will increase capital outflow in the country.

It all comes down to next month when the U.S. Federal Open Market Committee holds a meeting and is expected to discuss further details of its bond-purchasing scheme, said Choi Kwang-hyeok, an analyst at E-Trade Securities.

As far as the markets know, the Fed could begin scaling back its quantitative easing possibly in September as its minutes showed that “almost all” FOMC members generally agreed that it may be time to begin slowing down its $85 billion monthly bond purchase.

“Almost all participants confirmed that they were broadly comfortable” with tapering later this year, according to the FOMC minutes.

Choi of E-Trade projected that capital-flow volatility could further increase especially during and after the FOMC meeting on Sept. 17-18.

“It is too early to say that all the risks associated with the U.S. tapering have been reflected on the markets,” he said.

Korean monetary policymakers and regulators have been keen on watching and forecasting the U.S.’ next move in its monetary policy as a means to preemptively buffer against any side effects such as rise in market interest rates from the Fed’s stimulus exit.

Although some FOMC members said that it should still be “patient before deciding on any changes to the pace of asset purchases,” various economic indices pointed to the world’s largest economy recovering later this year, leading many analysts to believe that tapering will start in the near future.

By Park Hyong-ki (hkp@heraldcorp.com)