Are the stars aligning for EM equities?
Paul Jackson. Global Head of Asset Allocation Research and András Vig. Multi Asset Strategist
Given the origin of the Covid-19 virus and the tendency of emerging market (EM) countries to catch a cold when the rest of the world sneezes, it is surprising that EM assets have not performed even worse this year.
Our own index suggests that EM currencies have fallen by 6%-7% in real terms this year (see chart). Along with a widening of spreads, this has led to disappointing returns on EM bonds.
However, EM equities have held their own against many developed market counterparts. We find that this has nothing to do with the stringency of government Covid-19 actions. We think it has more to do with the cheap valuations on offer.
We have long extolled the value offered by EM assets and for the first time in ages this is paired with a belief that oil has bottomed. Are the stars aligning for EM equities?
For our more in-depth assessment click here.
