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2019 Emerging Markets Mid-Year Outlook

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2019 Emerging Markets Mid-Year Outlook: A Silver Lining Amid Global Uncertainty

  • We believe that emerging market equities are in the midst of a multi-year recovery and we continue to take advantage of the current volatility to increase positions in high conviction secular stories.
  • The re-escalation of US-China trade tensions is likely to be temporary. However, markets will probably experience higher levels of volatility due to the increased uncertainty and risk.
  • Asia ex-Japan: Asia ex-Japan valuations are currently at an attractive level and we see compelling risk-reward opportunities. China remains an attractive structural story, despite the headline risks. We expect Chinese policymakers to roll out further measures to support the domestic economy and anchor market expectations. In India, Prime Minister Modi’s re-election win should be positive for the Indian equity market as it provides stability and continuity for his development agenda. 
  • Latin America: Latin American countries continue to benefit from higher commodity prices and improved governance. After elections in many countries across the region last year, the focus has now shifted to policy implementa­tion. Our long-term outlook for Brazil remains constructive. Brazil is coming from a low earnings base, valuations remain attractive, and we see key catalysts for a near term country re-rating.
  • Eastern Europe, Middle East & Africa (EEMEA): EEMEA presents a diverse opportunity set. Countries like Russia, Saudi Arabia, and the United Arab Emirates should benefit from both higher oil prices and low inflation. Elections in South Africa and Greece will likely lead to more market friendly policies. Overall, valuations are attractive, political backdrops seem to be improving, and we believe that the region is set for solid performance in the second half of the year.

 

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.

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