LONDON - A stabilization in emerging markets after January's rout may turn out be the calm before the storm if political flare-ups and Fed policies provide the spark for the next round of selling.
Currencies in Turkey, South Africa, Hungary and Russia, which suffered violent sell-offs over the past month, have recovered slightly, partly because central banks have fought back via interest rates hikes or exchange rate interventions.
Investors also appear more sanguine about the U.S. Federal Reserve's plan to steadily withdraw monetary stimulus, a stance confirmed by its chair Janet Yellen this week.
But the next stress points are already emerging.
Some investors are bracing for the "April tipping point", when the Fed's stimulus withdrawal in real terms is expected to start having a more material impact on the economy.
"Another catalyst will be political uncertainty, with many of the deficit countries facing elections in 2014," said Gautam Chadda, director of investment consulting at RBC Wealth Management.
That includes the capital-hungry "Fragile Five" countries, voters in all of which are due to pass judgment on their governments this year.
"Markets don't like uncertainty and there is a lot of political uncertainty out there," said Chadda, who expects pressure on emerging markets to return as the Fed scales back its asset-purchases over the course of the year.
And if turbulence has ebbed in markets such as Turkey and India, it appears to be spreading to other parts of the developing world.
For instance, markets in commodity exporting Nigeria, which is sensitive to China's growth and until recently a top frontier market investment destinations, have tumbled.
The naira has hit two-year lows after President Goodluck Jonathan sacked four cabinet members ahead of next year's general election, and its weakness has been only partly stemmed by central bank intervention.
A weaker currency worsens the inflation outlook for Nigeria which depends on imports for almost 80 percent of goods sold in the country.
The cedi currency of another African commodity exporter Ghana, has also fallen to record lows.
Nigeria is also an example of an emerging economy that is seeing a steady depletion in its hard currency reserves -- its cash pile has fallen 7 percent over the past year.
Reserves fell in 11 out of 17 key emerging economies, including Russia, South Africa and Indonesia, in the year to January, as once-buoyant investment inflows dwindle and trade with a slowing China declines.
That in turn undermines the ability of central banks to support currencies under pressure.
Michael Howell, managing director of CrossBorder Capital, said recent poor economic data out of China is a reminder for investors of the sensitivity of many emerging markets to the world's second-biggest economy.
"Is the crisis over? It's not. Real exchange rates of emerging markets have to come down further," Howell said.
"Which banana skin are you going to slip on? I believe it would be weak economic data coming out of China or signs of FX reserves to start falling significantly."
He noted that Britain and the United States had recovered faster from Great Depression in the 1930s than France, which prioritised monetary discipline.
That could set the stage for a round of beggar-thy-neighbour competitive currency devaluations in emerging markets. Kazakhstan may already have started it, with its 19 percent tenge devaluation this week.
That move was motivated by weakness in the ruble of Russia, Kazakhstan's key trade partner.
"The shining lesson from the 1930s is that those countries that devalued currencies first got out quickly. (Kazakhstan) is following the script," Howell said.
The Federal Reserve's winding-down stimulus, which began in December, has so far not significantly driven up U.S. bond yields, which remain below levels seen in May-June last year.
But it may simply be that the real effect of tapering has not kicked in yet, because as the economy recovers and the U.S. budget deficit shrinks, the Treasury is issuing less debt.
Stephen Jen, managing partner of SLJ Macro Partners says that until the Fed's monthly bond-buying falls below $55 billion, tapering will not have a real impact, relative to total bond sales.
"The Fed's tapering will only catch up to the Treasury's tapering by April or so," Jen said. "This may help explain why equity prices have been so well supported in Q4 2013 and early 2014, despite the Fed's decision to taper."