Emerging markets have bounced back this year but investors need to tread carefully to avoid boom turning to bust in the second half.

Four key risks investors need to watch carefully for the rest of 2014:

1. Federal Reserve tightening: Emerging markets caught a cold late last year on fears that money would move back to U.S. assets as the Federal Reserve began reducing the flow of easy money.

2. Political risks abound: Some of the major developing economies — including Indonesia, Turkey and Brazil — have crucial elections coming up.

3. Uncertain economics: Deep-seated economic challenges such as slowing growth, high inflation and a dependence on foreign capital could return to haunt some emerging markets in the coming months.

4. Rising oil prices: Investors seem to be relaxed about the continuing crisis in Iraq. Oil prices spiked briefly in June as extremist Islamic militants advanced across northern Iraq, but have since fallen back, partly because of reports that Libya could resume exports.

 

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