Emerging markets outlook 2019: #IGEMChat

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.