Emerging markets outlook 2019: #IGEMChat

Watch IG’s Victoria Scholar, investor Paul McNamara and market commentator Gavin Serkin discuss what the future could look like for emerging markets (EMs) in 2019, or read our summary below.

With the Fed on pause, do you think that now is the ideal time to get into EMs?

Paul McNamara: I don’t think I would go quite that far. There would still be the same major risk, a much stronger US dollar, which would make it difficult for emerging markets. An EM does well when we are in a global growth environment. The problem last year was that there was a very strong US, but the rest of the world lagged. Essentially, the dollar was strong and EMs didn’t do very well. I think the risk is that we would see the same again. At the moment, valuations look fine: in bonds, in equities and so on.

Should we be focusing on EMs or should we be looking at the frontier markets?

Gavin Serkin: When it comes to frontier markets – the countries that are less established than EMs – you would look at which markets outperformed this year. So, you’ve got places like Argentina and Saudi Arabia – both of which happen to be about to go into the MSCI Emerging Market Index. But you’ve just got to look where value is, I wouldn’t differentiate too much based on whether it is an EM or a frontier market.

How optimistic are you about the impact of President Bolsonaro on Brazilian markets?

PM: Cautiously optimistic. I mean this is almost a unique situation, whereby the locals are optimistic and the foreigners are a bit more cautious, having a president who is actually talking about social security reform. They’re very impressed with his financial advice and this is seen as very positive. This is why we have seen such a rally so far.

GS: There does have to be an amount of caution about Bolsonaro. Just a few months ago the Economist was running a front page on the death of democracy in Brazil. So, you do have to read the rhetoric but economically speaking, this is a technocrat that is running the Brazilian economy.

Watch the full #IGEMChat for more

Throughout the discussion on the outlook for emerging markets in 2019, Paul and Gavin covered a range of topics, including:

  • Is there further to run for the Bovespa stock exchange?
  • Where are the opportunities within the LATAM space?
  • Is there opportunity in Russian assets?
  • Why did the correlation between the ruble and oil breakdown?
  • Should we be sceptical toward Russian growth figures?

If you’d like to find out more about these topics and many more, watch the full #IGEMChat video.

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European Central Bank meeting

Learn about how the ECB meeting affects interest rates and price stability ahead of the next announcement on 24 October 2019.

  • How might the next meeting affect the markets?
  • What are the key rate decisions to watch?
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