As countries worldwide rally financially to offset the economic effects of the Covid-19 crisis, CAMRADATA’s latest whitepaper on Emerging Markets focuses on the developing markets and considers opportunities in both the equity and fixed income arena of this dynamic region.The whitepaper includes insight from guests who attended a virtual roundtable hosted by CAMRADATA in September including representatives from Amundi Asset Management, Mackenzie Investments, Muzinich & Co, Aon, Blue Sky Pension Fund, Riscura and Willis Towers Watson.
The report highlights that whilst the growth outlook may be uncertain in many emerging markets at present given the pandemic and the differing government and policy responses, there is a general consensus in the investment community that Asian countries have contained the virus better than many Western countries, with swifter implementation of lockdown measures, resulting in earlier recovery.
Sean Thompson, Managing Director, CAMRADATA, says: “It is vital that, rather than lumping all emerging markets into a single monolithic group, investors recognise the varying responses in handling the coronavirus as this will translate into market performance.
“Investors will also need to keep an eye on the US presidential election given the spill-over effects on emerging markets and limited capacity for further fiscal or monetary stimulus. But there are opportunities for investors in emerging markets.
“With a higher exposure to technology than other regions, Asia is well poised to benefit given the sector has been one of the few beneficiaries of the pandemic. Our expert panel explored opportunities and concerns for investors as we move through the pandemic and emerging markets begin to recover.”
Most panellists at the event agreed that financial markets are out of kilter with the underlying economy. However, none of the panel has changed their fundamental investment strategy despite the extraordinary effects of Covid-19 and largesse in response from states and central banks. Looking forward, many see great opportunities in debt and equity for active managers; plus, a standalone allocation to China in equities is becoming the norm.
The discussion ended looking at equities, and in particular Chinese equities. The panel noted that investors allocating to China require more research to understand the norms and dynamics in China and build up expertise of the universe and comfort to allocate more capital to a less familiar market.
However, it was agreed the world’s second largest economy sat awkwardly within Emerging Markets index, with one panellist pointing out that China is not emerging in foreign policy or tech. People spend lots of time thinking about how to allocate to the US but not China.
