Emerging Markets Outlook: Q4 2020
Urbanisation, Innovation, Disruption.
While emerging markets economies have been hit hard by falls in commodity prices and slowing international trade, many have managed the COVID-19 pandemic better than the major developed nations. Less fiscal stimulus and unconventional monetary policy measures have left these economies better placed to exploit a number of pre-existing trends which have been accelerated by the onset of the pandemic.
Many of these economies also benefit from positive demographic change leading to rapid urbanisation, and while that causes its own issues, it also helps create significant aspirational consumer demand. Innovative, disruptive companies are extremely eager to satisfy those burgeoning needs.
EMERGING MARKETS OUTLOOK
Emerging Markets – Dislocation creates opportunities (Amundi, Oct 2020)
For compliance reasons, this paper is not accessible in the United States
Amundi notes the disruption caused to emerging markets by falling oil prices and declining trade. However, most emerging economies have managed their COVID-19 experience better than developed world economies and a number are replacing international trade by stimulating domestic demand.
North Asia vs South Asia: Differentiation is key (DWS, Oct 2020)
In this paper from DWS, they note a differential response to the COVID-19 pandemic from North and South Asia, with the North more quickly containing the virus and reflating economies decimated by the downturn in global trade.
Small EM Companies Driving Big Innovations (Franklin Templeton, 2020)
For compliance reasons, this paper is only accessible in selected countries
Franklin Templeton highlights that for a number of small-cap companies in emerging markets, the COVID-19 crisis has presented opportunities. They focus upon trends in the technology space.
Navigating the Pandemic: A multispeed recovery in Asia (IMF, Oct 2020)
This IMF Annual Outlook Report notes that a recovery has set in across much of Asia, but that the rate of growth differs markedly between economies and nations.
The Future of Emerging Markets: Social infrastructure (RBC GAM, 2020)
This RBC GAM paper highlights the demand for infrastructure assets because of rapid urbanization across emerging markets. They outline the supply demand mismatch in areas such as education, healthcare, and housing.
Emerging Markets: Coming of age (Baillie Gifford, Oct 2020)
Baillie Gifford’s Will Sutcliffe revisits the notion of ‘emerging markets’ – a term first coined 40 years ago. He observes that far from being ‘emerging’, a number of home-grown, world-class companies have evolved to meet the needs and aspirations of the demographic dividend of two billion aspirational consumers.
Why Diversity and Demographics Favor Investing in India (Robeco, Oct 2020)
Robeco focuses upon the opportunities provided by the transformative forces of formalization, financializaton, and urbanization in India.
S&P LatAm Equity Indices Quantitative Analysis Q3 2020 (S&P Dow Jones Indices)
A detailed analysis of how Latin American markets performed during Q3 is provided in this S&P Dow Jones Indices paper.
EM DEBT
Emerging Market Debt: Despite headwinds, opportunities remain (NN IP, Oct 2020)
NN IP argues that while investors should be aware of the pitfalls, they should also consider the enhanced yield offered by emerging market debt in an environment where developed market interest rates are likely to remain ‘lower for longer’.
EM Debt: Q3 review and Q4 outlook – Shifting to a lower gear (UBS AM, Oct 2020)
Emerging market debt performed well in Q3 on the back of improving global economic activity. Post-election policies from the next U.S. administration will have a significant impact on emerging market asset prices, suggests UBS AM.
Emerging Market Debt: A path less volatile (Aviva Investors blog, Sep 2020)
For compliance reasons, this paper is only accessible in selected countries
Aviva Investors notes the bounce-back in hard currency emerging market debt, but caveats that there are a host of challenges that remain, with over 100 countries having approached the IMF seeking refinancing or financing deals.
Emerging Markets Local Currency Investing (PGIM Fixed Income, Oct 2020)
PGIM Fixed Income suggests that the unconventional monetary policy measures being introduced in developed markets have profound implications for investors in EM local currency (EMLC) debt.
CHINA
Giving Credit to China (Invesco, Oct 2020)
For compliance reasons, this paper is only accessible in selected countries
This paper from Invesco highlights the rapid growth in credit in China, particularly in the shadow banking sector. Whilst banks across the globe will see increased bad debt provisioning following the COVID-19 pandemic, Invesco feel that China-specific fears are overplayed.
China – Adjusting the lens (Baillie Gifford, Sep 2020)
For compliance reasons, this paper is only accessible in selected countries
Ballie Gifford notes that the COVID-19 pandemic has engineered large economic shifts and trends, some of which may exist for decades. They believe that China will be at the forefront of many of these, including disruption, technological innovation and changing consumption patterns.
China's Big Cycle and its Currency (Ray Dalio, Sep 2020)
Ray Dalio continues with another chapter from his book, “The Changing World Order”. This time he explores several of the leading empires from the last 300 years and puts the rise of China into historical context.
China’s Unsettled Recovery from the Great Lockdown (PGIM Fixed Income, Oct 2020)
PGIM Fixed Income argues that the rebound in China’s economic recovery is quite uneven, and potentially masks some more disturbing, but as yet unanswered questions.
EMERGING MARKETS WEBINARS
Webinar: The evolving Asia derivatives landscape (FTSE Russell, 2020)
This joint participant webinar highlights the evolving derivatives landscape in Asia, including Taiwan Index futures and an expanding Singapore Exchange equity derivative offering. Goldman Sachs offers their perspective on the future of Asian derivatives.
The Meeting Room Webcast: Global emerging markets (Federated Hermes, Oct 2020)
For compliance reasons, this paper is not accessible in the United States
The team from Federated Hermes Global Emerging Markets team discusses recent performance and prospects from a portfolio and market positioning viewpoint.
Webinar: China – Five-year CMAs and insights (UBS AM, Sep 2020)
In this webinar, UBS AM experts outline their five-year Capital Market Assumptions for China and offer insights and perspectives on the opportunity set in this intriguing market.
Webinar: Why are so many EMD managers underperforming? (Aviva Investors, 2020)
For compliance reasons, this paper is only accessible in selected countries
In this webinar from Aviva Investors, they examine a number of the key reasons why so many EMD hard currency managers underperform, particularly in times of market stress.
ABOUT THE AUTHOR
Andrew Perrins is a former Actuary and Asset Allocator. After qualifying as an Actuary, he worked for 15 years in investment management, serving as Director of Asset Allocation for Abbey Life and for Chase Manhattan, before setting out on a more entrepreneurial path.
To contact him, email [email protected]