Emerging market assets reach historic valuations

24 Mar 2020

20 Minutes

Authored by Mike Hugman, Portfolio Manager, Fixed income

24 March 2020

Given recent market turmoil, Mike Hugman asks: has the current crisis created a unique entry point for long-term investors?

The mechanics of capital markets have changed since the global financial crisis meaning that the current ‘triple’ crises* do not pose a systemic risk to the banking sector. Yet unprecedented turmoil has swept through markets. And investors have seen a major re-pricing of emerging market assets. In some cases, this has been on a par with the global financial crisis. 

Before the recent turmoil, many emerging market assets were already on undemanding valuations, and structural investors’ positioning was relatively light in emerging market local debt and equities. Furthermore, structural fundamentals of emerging market economies are typically strong.  

In a new paper, Mike Hugman explains that as short-term fundamentals and market liquidity begin to stabilise, we believe it is vital for long-term investors to assess the return potential in emerging markets as a whole and the bottom-up opportunities that this historic market dislocation has created. 

Read the paper

Important information

* COVID-19, the break-up of OPEC+ and a liquidity event as post-GFC rules have pushed all market risk to asset managers and owners. 

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

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.