CONTRIBUTORS
Chetan Sehgal
Senior Managing Director,
Director of Portfolio Management
Singapore
Key takeaways
- Given the rise in global uncertainty, we believe it is time to take a fresh look at emerging markets (EMs). The breadth of opportunity, growth, innovation and strong institutional resilience represent an attractive investment opportunity.
- Emerging markets offer a diverse investment universe, ranging from markets with companies at the cutting edge of technology in Asia, to commodity exposed markets in Latin America. Between these two geographic extremes are the oil rich, but diversifying economies of the Middle East and India’s large consumer market.
- This report explores the investment case amongst the largest emerging markets, some of their unique characteristics and the threat and opportunity created by President Trump’s trade war.
While not without their own risks, EMs represent a diverse and unique opportunity for active investors. EMs structural advantages include attractive demographics and technological leadership in high-growth industries including artificial intelligence and the electrification of transportation.
Investors in EM can buy companies with exposure to these themes at attractive valuations and a clear pathway to higher earnings. Over time, such characteristics should be recognized by the market, leading to a rerating of their valuation and narrowing the valuation discount relative to developed markets.
WHAT ARE THE RISKS
All investments involve risks, including possible loss of principal.
Equity securities are subject to price fluctuation and possible loss of principal.
International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Investments in companies in a specific country or region may experience greater volatility than those that are more broadly diversified geographically.
There are special risks associated with investments in China, Hong Kong and Taiwan, including less liquidity, expropriation, confiscatory taxation, international trade tensions, nationalization, and exchange control regulations and rapid inflation, all of which can negatively impact the fund. Investments in Hong Kong and Taiwan could be adversely affected by its political and economic relationship with China.
Active management does not ensure gains or protect against market declines.
WF: 5617608/5616358/5597768