Is EM turmoil the third wave of the financial crisis? Goldman thinks so

Goldman Sachs is making bold statement about emerging markets
Goldman Sachs is making bold statement about emerging markets
5-star fund manager's EM picks
5-star fund manager's EM picks
Too early to get back in EM game: Pro
Too early to get back in EM game: Pro
Not all EM countries are in trouble: ESM chief
Not all EM countries are in trouble: ESM chief

Emerging markets aren't just suffering through another market rout—it's a third wave of the global financial crisis, Goldman Sachs said.

"Increased uncertainty about the fallout from weaker emerging market economies, lower commodity prices and potentially higher U.S. interest rates are raising fresh concerns about the sustainability of asset price rises, marking a new wave in the Global Financial Crisis," Goldman said in a note dated last week.

The emerging market wave, coinciding with the collapse in commodity prices, follows the U.S. stage, which marked the fallout from the housing crash, and the European stage, when the U.S. crisis spread to the continent's sovereign debt, the bank said.

Read More Asia's mighty market bounceback

Concerns that the U.S. Federal Reserve would raise interest rates for the first time in nine years spurred a massive outflow of funds from emerging markets, including Asia's, recently. But the Fed meeting on September 16-17 surprised markets by leaving rates unchanged and many analysts moved their forecasts for the next hike back into next year.

That's helped to stabilize hard-hit markets and currencies, but some analysts expect that's just a temporary reprieve.

One of the reasons Goldman is concerned about emerging markets is that lower interest rates globally have fueled credit growth and a debt buildup, especially in China, and that's likely to impede future economic growth.

Goldman noted that downgrades for emerging market economic and earnings outlooks have spurred fears of a "secular stagnation" of permanently low interest rates and fading equity returns. But it added that those fears are overdone.

"Much of the weakness in emerging markets and China is likely to reflect rebalancing of economic growth, rather than structural impairment," it said. "While the adjustment is likely to take time (as it did in the U.S. and European Waves), it should lead to an unwinding of economic imbalances in time, providing the platform for 'normalization' in economic activity, profits and interest rates."

Read More El-Erian: Emerging markets are 'completely unhinged'

But when it comes to equity returns, Goldman doesn't necessarily expect emerging markets will regain all their lost luster.

"The fundamental shift in relative performance away from emerging-market to developed-market equity markets, and from producers (and capex beneficiaries) to consumers is likely to continue," it said.

Some aren't as certain that there will be an economic recovery in emerging markets.

The segment's trend growth rate has been declining, exacerbated by a lack of structural reforms over the past 10 years, Deutsche Asset and Wealth Management said in its October outlook note.

"The ultra-expansionary monetary policy of the developed economies prompted many investors to invest in emerging markets in part because they offered an interest-rate advantage," Deutsche said. "In reality, however, this favorable financing environment simply helped emerging markets to veil their growing economic weakness."

But with the easy-money environment spurring over-investment, emerging market companies face not just higher debt, but also potentially burdensome interest payments amid slim economic growth, Deutsche Asset said.

"The risk of credit defaults and bankruptcy is likely to rise," it said. "The combination of high investment rates, rising debt and declining growth has made emerging markets much more vulnerable than before."