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The case for emerging market equities in an era of transitioning secular drivers
The drivers of emerging market equity returns are evolving as innovation and economic decoupling join favorable demographics as future sources of excess returns. The Emerging Market Equities Team believes that while the asset class’s potential has increased, it must be approached in a risk-aware manner that prioritizes selectivity.
13 Sep 2024
6 minute read
6 minute read
Key takeaways:
- In the past, EM equities offered opportunities to capitalize on economic growth differentials, convergence and outsourcing. Today, EM companies provide valued-added innovation with strong potential for future earnings growth.
- Reformist governments are supporting the private sector to achieve national objectives such as health care delivery, energy security, and improved access to financial services.
- With an active, risk-aware EM approach, investors can gain exposure to the secular themes of innovation, decoupling and favorable demographics within an increasingly evolving asset class.
The widening range of economic and market outcomes for emerging markets can often lead to periods of increased market volatility. How can a multi-lens approach premised on country, company and governance better capture excess returns, and potentially dampen the volatility inherent in the asset class?
Note: There is no guarantee that past trends will continue, or forecasts will be realized.
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Definitions
Emerging market: the economy of a developing country that is transitioning to become more integrated with the global economy. This can include making progress in areas such as depth and access to bond and equity markets and development of modern financial and regulatory institutions.
Volatility: the rate and extent at which the price of a portfolio, security or index, moves up and down. If the price swings up and down with large movements, it has high volatility. If the price moves more slowly and to a lesser extent, it has lower volatility. The higher the volatility the higher the risk of the investment.
JHI
13 Sep 2024
6 minute read
6 minute read
Key takeaways:
- In the past, EM equities offered opportunities to capitalize on economic growth differentials, convergence and outsourcing. Today, EM companies provide valued-added innovation with strong potential for future earnings growth.
- Reformist governments are supporting the private sector to achieve national objectives such as health care delivery, energy security, and improved access to financial services.
- With an active, risk-aware EM approach, investors can gain exposure to the secular themes of innovation, decoupling and favorable demographics within an increasingly evolving asset class.