2022 Emerging Markets Mid-Year: Navigating Opportunities and Headwinds
By: Rahul Chadha, Chief Investment Officer (HK) and Malcolm Dorson, Senior Portfolio Manager (US)
Highlights:
- China has undergone a difficult first half of the year. The growth slump, which started with the regulatory reset last year, was exacerbated by China’s zero-Covid approach. With regulatory pressures now easing, we believe that Chinese internet companies are exiting the bottom of the cycle, with strong upside potential if positive catalysts emerge.
- ASEAN countries are expected to see relatively healthy economic activity, supported by an accelerated reopening and strong trade flows. Within the region, we continue to favor Vietnam as an off-benchmark play. Vietnam exhibits favorable demographics with a young and growing skilled talent pool driving the country’s rise as a global manufacturing hub.
- Latin America and EEMEA, broadly speaking, are well-positioned for the second half of 2022. The Middle East and Latin America should benefit from higher energy prices. Latin America and South Africa would be key beneficiaries of a recovery in Chinese economic activity, and countries like Greece should see dynamic growth coming from a recovery in tourism this summer.
ASEAN = Association of Southeast Asia Nations is the organization of countries in Southeast Asia set up to promote cultural, economic and political development in the region.
EEMEA = Emerging Europe, the Middle East & Africa
The views and information discussed in this brochure are subject to change and may not reflect the current views of the writer(s). The views expressed represent an assessment of market conditions at a specific point in time, are opinions only and should not be relied upon as investment advice regarding a particular investment or markets in general. Such information does not constitute a recommendation to buy or sell specific securities or investment vehicles. It should not be assumed that any investment will be profitable or will equal the performance of the portfolios or any securities or any sectors mentioned herein. The subject matter contained herein has been derived from several sources believed to be reliable and accurate at the time of compilation.
Past performance is no guarantee of future results.
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.
Market Disruption and Geopolitical Risk — Geopolitical and other events, including war, terrorism, economic uncertainty, trade disputes, natural and environmental disasters, systemic market dislocations, public health crises and related geopolitical events have led, and in the future may lead, to increased market volatility, which may disrupt U.S. and world economies and markets and may have significant adverse direct or indirect effects on the value of a Fund and its investments.