2020 Emerging Markets Mid-Year Outlook: Emerging Market Opportunities in a Post Covid-19 World
- We believe that emerging market (EM) economies should show more resilience to the Covid-19 crisis than developed market economies. We see two key catalysts that should help drive strong EM equity performance in the second half of the year: (1) Covid-19 stabilization and the opening of the US economy, and (2) a weaker US dollar.
- Asia ex-Japan: China, South Korea, Vietnam and Taiwan were the first countries to impose quarantines and lockdowns. These countries are recovering and moving towards economic normalization. US-China rhetoric will likely continue to weigh on market sentiment in the near term, but it may also provide an opportunity for strong Chinese brands to make further inroads with domestic consumers and gain market share from their foreign competitors.
- Latin America: Latin American countries have recently faced headwinds from various directions. However, we believe that the combination of a low base for earnings, attractive valuations, and high growth rates create strong prospects for select companies in Latin America.
- Eastern Europe, Middle East & Africa (EEMEA): EEMEA presents a diverse opportunity set going into the second half of 2020. With oil at historically low prices, countries like Russia, Saudi Arabia, and the United Arab Emirates may benefit from improving supply & demand dynamics, which should improve their respective trade balances, fiscal balances, currency dynamics, and equity markets.
Investment Considerations — There can be no guarantee that any strategy (risk management or otherwise) will be successful. All investing involves risk, including the potential of loss of principal.
Emerging Markets Risk — The risks of foreign investments are typically greater in less developed countries, which are sometimes referred to as emerging markets. For example, political, legal and economic structures in these country may be changing rapidly, which can cause instability and greater risk of loss. These countries are also more likely to experience higher levels of inflation, deflation or currency devaluation, which could hurt their economies and securities markets. For these and other reasons, investments in emerging markets are often considered speculative. Similarly, investors are also subject to foreign securities risks including, but not limited to, the fact that foreign investments may be subject to different and in some circumstances less stringent regulatory and disclosure standards than U.S. investments.