Emerging Markets Outlook: Feb 2022

Emerging Markets: Prospects for 2022

After a decade of underperforming developed world markets, might it finally be a year in which emerging markets equities come good? Valuations appear at seemingly attractive levels according to some commentators, with post-pandemic GDP recovery rates likely to exceed developed world growth, but can EM equities overcome the headwinds of a rising dollar and rising U.S. rates? Similarly, some observers highlight the attraction of Asian, and particularly Chinese, bonds, especially as the U.S. and China may now be on a divergent monetary policy trajectory.

Among this selection of papers are several that look at the prospects for both EM debt and equities, while an interesting piece from PGIM Fixed income looks at food price inflation and political risk in emerging economies. Janus Henderson Investors argues that EMs should not be treated as a homogenous unit, with several divergent outcomes likely across economies this year. The elephant in the room for all EM investors remains China. Do valuations now fully reflect political and regulatory intervention, can the property debt mountain be successfully negotiated, and will the upcoming National Party Congress spring some further surprises on investors? 

  

Rising Food Prices and Political Instability in EMs (PGIM Fixed Income, 2022)

PGIM Fixed Income examines the potential influence of food inflation in emerging markets, noting that because of its higher weighing in consumer budgets, food price rises have potentially caused political crises.

Emerging Market Debt Outlook 2022: Seven opportunities to exploit (NN IP, 2022)

NN IP suggests that given modest assumptions for the asset class, current market conditions may afford active EM bond managers an opportunity to outperform the broad market. They also consider that EM debt offers portfolios both diversification benefits and the attraction of higher yields.  

EM Debt: Cross currents bring risks and opportunities in Q1 2022 (UBS AM)

UBS AM explores the prospects for EM debt against a backdrop of rising inflation, rising interest rates and the post-pandemic recovery. 

Podcast: What drives Asia investment grade bonds? (PineBridge Investments, 2022)

Omar Slim, Senior Portfolio Manager, Fixed Income, suggests reasons why investors should consider the attractions of Asia’s hard currency investment-grade bond market.

Global Emerging Markets: Outlook 2022 (Federated Hermes)

For compliance reasons, this paper is NOT accessible in the United States

Federated Hermes fund manager Kunjal Gala shares his views on the prospects for emerging markets in 2022.  

Podcast: LatAm... To the left, to the left (MetLife IM, Jan 2022)

Tom Smith, Emerging Markets Portfolio Manager, explores the shift towards the political left in Latin America, and discusses its potential market implications.  

Divergent EM Outcomes in an Uneven Recovery (Janus Henderson Investors, 2022)

For compliance reasons, this paper is only accessible in certain geographies

Experts from Janus Henderson discuss the heterogenous nature of EM economies and debt markets and how this may affect investor opportunities.

Chi on China (BNP Paribas AM, Feb 2022)

BNP Paribas AM argues that although many people foresee a debt crisis in China, it has yet to materialise. They also concur its economic fundamentals suggest that it could withstand one, without systemic risk severely affecting world markets.

Emerging Markets Charts and Views – Reasons for cautious optimism (Amundi, 2022)

For compliance reasons, this paper is NOT accessible in the United States

Amundi argues that after a torrid year in 2021, including a debt crisis in China, rising inflation and a more hawkish Fed, emerging markets valuations now look more attractive, and may offer investors reasons for cautious optimism. 

A Case for Emerging Markets (Meketa, 2022)

EM equities have underperformed U.S. equities significantly since the global financial crisis, despite GDP growth being better. Meketa argues the changing composition of EM indices towards an Asian growth story has not been recognised by investors, while the asset class continues to offer attractive diversification benefits.

Long Only Factor Portfolios in India (2022)

The authors suggest that models based on popular factors of momentum, low-volatility and quality can generate alpha in the Indian stock market.  

Latin America: The post-pandemic economic decade (CEPR)

This eBook discusses the challenges ahead for Latin America post-pandemic, and suggests policy solutions to tackle social, economic and health issues, which may lead to a more sustainable and equitable future.