EM in discussion

Straight talking from our EM experts

For our July EM in Discussion event we asked investors from across the globe what’s on their minds when it comes to investing in EM today.

2021 M07 15

56 minutes

For our July EM in Discussion event we asked investors from across the globe what’s on their minds when it comes to investing in EM today.
Our panel of EM experts discuss valuations, inflation, COVID, ESG, current opportunities and much more.

The fast view

  • EM valuations are less stretched than many perceive them to be. This is especially the case when comparing to DM and when considering we may be at the start of a new growth cycle, with the push to ‘green’ the global economy likely to be a further structural tailwind for EM economies.
  • The inflation picture is encouraging overall, with core inflation well behaved; supply shocks are temporary while demand drivers paint a picture of stronger growth. EM central banks have been proactive in countering inflationary pressure and staying ahead of the Fed. Some have already hiked; others are about to, and this is already priced in.
  • Headlines about regulation in China should not overly worry investors. Closer tech sector scrutiny and moves to take the heat out of the property market both point to a more sustainable path for China’s economy and companies. While growth is slowing, these overall trends are positive for long-term investors.
  • COVID vaccination programmes across most EM countries are making good progress. We expect that most EMs will have vaccinated a big proportion of their adult population by year-end, although some countries still have progress to make. This will help economies to continue to recover and enter the new growth cycle.
  • Equity market evolution in EM over the last decade has resulted in a better quality investment universe. There are significant differences in the regional and sector make up of EM equities and EM corporate debt and a relatively low correlation; allocating to both can benefit a portfolio’s risk/return profile.
  • With COP 26 on the radar, clients’ expectations have ramped up re. ESG integration and reporting. It’s key that this focus also enables a ‘just’ transition for EM. EMs will play a key role in the global net zero transition and engagement with corporates and sovereigns is crucial to help make this happen.
  • We see interesting opportunities in equities among India’s IT Services providers, which have benefited enormously from COVID-induced shifts among businesses. We like local debt markets where a rate hiking cycle has been well priced by the market (eg Czech Republic) or easing is on the horizon (eg China). Among sovereign credit markets we like some high-yield names, including Ukraine and Egypt.

Watch the webinar:

General risks
The value of investments, and any income generated from them, can fall as well as rise.

Specific risks
Emerging market (inc. China): These markets carry a higher risk of financial loss than more developed markets as they may have less developed legal, political, economic or other systems. Currency exchange: Changes in the relative values of different currencies may adversely affect the value of investments and any related income. Geographic / Sector: Investments may be primarily concentrated in specific countries, geographical regions and/or industry sectors. This may mean that the resulting value may decrease whilst portfolios more broadly invested might grow. Liquidity: There may be insufficient buyers or sellers of particular investments giving rise to delays in trading and being able to make settlements, and/or large fluctuations in value. This may lead to larger financial losses than might be anticipated.

All investments carry the risk of capital loss. The value of investments, and any income generated from them, can fall as well as rise and will be affected by changes in interest rates, currency fluctuations, general market conditions and other political, social and economic developments, as well as by specific matters relating to the assets in which the investment strategy invests. If any currency differs from the investor’s home currency, returns may increase or decrease as a result of currency fluctuations. Past performance is not a reliable indicator of future results.

Wichtige Informationen

Diese Mitteilung dient lediglich der allgemeinen Information und ist nicht als Beratung zu verstehen.

Alle darin enthaltenen Informationen gelten als zuverlässig, können jedoch ungenau oder unvollständig sein. Die Ansichten sind die des Verfassers zum Zeitpunkt der Veröffentlichung und spiegeln nicht unbedingt die Ansichten von Ninety One wider.

Alle geäußerten Meinungen werden ehrlich vertreten. Diese sind jedoch nicht garantiert und somit sollte sich auf diese nicht verlassen werden