Analysis-After another torrid year, can emerging markets rediscover their mojo?

LONDON : The spectre of higher interest rates in the United States, slowing growth in China and a strong dollar have this year hammered emerging markets already reeling from the fallout of the coronavirus pandemic.

Then there are the low COVID-19 vaccination rates and the unpredictability of policies and politics in the likes of Turkey - whose currency has collapsed this year - and Latin America, further denting confidence. Emerging assets had been expected to perform well as economies recovered from the pandemic, commodity prices rebounded and investors chased opportunities outside of expensive-looking, low-yielding developed markets.

Against others, performance is better. Since the end of 2016 the MSCI World ex-U.S. has risen 34per cent, less than the emerging index's 40per cent gain. But that also means developing equities may not be as cheap as they appear.Beijing's 'Common Prosperity' plan, which seeks to redistribute the spoils of economic growth, may spell the end of huge headline-grabbing growth numbers.

"Asset allocators globally still treat EM as a tactical trade rather than a strategic one," said Mary-Therese Barton, Pictet Asset Management's head of emerging debt."What we hope is the richness of the EM universe will be appreciated. For the moment, when we can't see the wood for the trees, that's hard."

Source: Financial Digest (financialdigest.net)

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