Emerging Markets: Time to fear the inflation bogeyman?

EM Update With APAC in Focus

Inflation is everywhere. Emerging markets face ripple effects from price rises in the U.S. as well as their own macroeconomic priorities and concerns. It is Asia Pacific (APAC) that we open this EM update with though, looking at the region's economic health, asset manager priorities, and equity selection. Don’t miss the Round-Up section as well which has a catch-all EM update, and focused regional papers.

APAC

Podcast: Asia Pacific asset managers prioritise growth (State Street, Apr 2022)

What lies ahead for allocators in Asia Pacific? Building on a survey of more than 600 institutional investors, this podcast explores how asset managers in the region aim to achieve their growth ambitions. Discussion points include China, technology, private markets, and ESG.

Why Invest in Asia Small-Cap Equities Now? (PineBridge Investments, Apr 2022)

PineBridge Investments looks to answer five key questions related to investing in Asia, concluding that the small-cap equity market remains appealing. They discuss the region’s growth prospects, the health of Asian companies in the current environment, and China’s outlook.

East Asia and Pacific Economic Update Spring 2022 (World Bank)

East Asia and the Pacific region have not been immune to the knock-on effects of war in Ukraine, U.S. inflation, and China’s slowdown. The authors note, however, opportunities from positive shifts in the trade landscape and the potential from both digital and green technologies.

INFLATION

EM in a World of Higher Long-Term U.S. Inflation (PGIM Fixed Income, Apr 2022)

Whilst inflation is raging in the U.S. currently, the target is to achieve a 2% long-term average rate. This article considers the potential effects of this on emerging markets – specifically what it could mean for inflation, real growth, rates, spreads, and forex returns.

From Low to High Inflation: Implications for EM and DM (VoxEU/CEPR, 2022)

It seems likely that inflation rates will remain high for the foreseeable future. This paper analyses the implications of this shift, which has been global in nature and challenged central bank policy in most developed and emerging market economies.

ROUND-UP

Emerging Markets Quarterly Outlook – Apr 2022 (CLIM)

This quarterly assessment of emerging markets offers a comprehensive outlook and strategy view across Asia, Latin America, Europe, Middle East and Africa. In light of recent developments, the authors are advocating an overweight in Brazil and Malaysia, and a neutral position in China.

Invesco's Country Spotlight: Brazil (Invesco, May 2022)

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

Brazil is in focus here, and Invesco puts forward a supportive backdrop for investment. The economy, supported by commodity prices and a strong currency, could fare well despite global inflation. Meanwhile, there is hope that a stable political environment will provide further tailwinds.

Africa Private Capital: Fundraising and deal values (GPCA, 2022)

Private capital investment in Africa is growing, driven by technology and digitalisation but also by traditional sectors like natural resources, retail, and supply chain services. Also detailed are VC, financial services, infrastructure, and renewable energy investment in the region.