It all shows that investors are turning less forgiving of policy mistakes and valuation excesses. Many developing nations face a dilemma between tightening policy to contain price pressures and keeping it loose to support fragile economic recoveries.

“Emerging markets headwinds are growing as global financial conditions tighten, new waves of Covid-19 continue to rage, as importers are being hit by high energy prices, and rising local inflation becomes a challenge for monetary-policy credibility,” Danske Bank A/S strategists led by Minna Emilia Kuusisto wrote in a note.

Thursday’s moves, creating a sea of red in market prices, worsen a volatile year. The MSCI EM equity benchmark has dropped 1.3% in 2021, after erasing year-to-date advances multiple times. The equivalent currency gauge has also fluctuated between gains and losses.

All the swings are increasing the price of hedging, with the average cost of protecting against default by emerging-market governments heading for the biggest annual increase since 2018.

Policy moves also sparked fireworks in the lira. It sank past 11 per dollar just four trading days after crossing the 10 mark. Options traders are betting on further losses, with a gauge of one-month volatility on Thursday jumping the most this week in more than three years, to 30%. That comes as the central bank’s move to cut borrowing costs for a third month has eroded investor confidence on its independence.

Dovish comments in South Africa hurt the rand, sending it to this year’s low. South Africa did raise rates, but investors saw it as a dovish hike after authorities said further tightening would be gradual. With this, the currency is heading for its worst year since 2018.

It was politics driving losses in Chile. The peso sank to its lowest since May 2020 as traders punished the currency ahead of the nation’s hotly contested election on Sunday. The currency has weakened about 4.3% in three days, its worst performance since January.

Read the QuickTake: Why Chile’s Presidential Vote Comes at a Shaky Time

On stocks, the day started with indexes in China and Hong Kong plunging, after Morgan Stanley said Chinese companies are witnessing the worst earnings season since 2018. The bank also predicted “sizable” reductions to forecasts.

The mood soured further when real estate developer Shinsun Holdings plunged more than 50% after the lock-up period connected with its initial public offering expired. The company quickly moved to allay debt-default fears, a flashpoint for the market given China Evergrande Group’s troubles.

In India, One 97 Communications Ltd., the operator of the country’s largest digital-payments provider, lost over a quarter of its IPO price on the first day. The slide surprised even those who questioned its valuation. Retail investors who piled into offering, alongside BlackRock Inc. and the Canada Pension Plan Investment Board, are now sitting on heavy losses.