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Over the past decade, emerging markets (EM) have experienced mixed fortunes, as strong early performance was followed by more recent lacklustre returns.1 The strong US market and dollar as well as the weak Chinese economy impacted returns. The next decade may see EM stock markets return to their former glory.

It is important to remember that emerging markets (EM) are not the same as ten years ago, or even the decade before that. Since the significant outperformance of the early 2000s,2 the shape of the asset class has changed. Information technology is the largest sector allocation in the asset class and commodities no longer dominate.3

In this paper, we will put into context the recent difficult period and explore the key reasons why we believe one should continue allocating to EM equities. We focus on the following:

  1. Mapping the EM journey
  2. The United States
  3. China
  4. India
  5. Technology

We believe the key drivers which will dictate how we navigate the future are all aligned positively for EM. The asset class will continue to evolve and we're excited for the journey ahead.

Endnotes

  1. Source: Morningstar: MSCI EM NR USD, MSCI EAFE NR USD, MSCI USA NR USD: 31 December 2000 – 31 December 2023.
  2. Source: Morningstar: MSCI EM NR USD, MSCI EAFE NR USD, MSCI USA NR USD: 31 December 2000 – 31 December 2023
  3. Source: Factset as at 21 May 2024.

WHAT ARE THE RISKS?

All investments involve risks, including possible loss of principal. Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Past performance is no guarantee of future results. 

Equity securities are subject to price fluctuation and possible loss of principal.

International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets.

Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors.

The government’s participation in the economy is still high and, therefore, investments in China will be subject to larger regulatory risk levels compared to many other countries.

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 Taiwan could be adversely affected by its political and economic relationship with China.

US Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the US government. The US government guarantees the principal and interest payments on US Treasuries when the securities are held to maturity. Unlike US Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the US government. Even when the US government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities.

Chapters

30 AUGUST 2024

Emerging markets: An evolving landscape—China

Martin Currie discusses the disconnect between share prices and fundamentals, creating a significant investment opportunity.

30 AUGUST 2024

Emerging markets: An evolving landscape—India

Martin Currie believes India has the potential to drive returns in emerging markets over the next decade as the structural growth opportunities come to fruition and companies rise to the challenges presented to them.

30 AUGUST 2024

Emerging markets: An evolving landscape—mapping the emerging markets journey

Martin Currie puts into context the recent difficult period and explores the key reasons why we believe one should continue allocating to emerging market equities.

30 AUGUST 2024

Emerging markets: An evolving landscape—the United States

Martin Currie highlights how the changing tides in US policy and macroeconomics may favourably impact the emerging markets asset class.

30 AUGUST 2024

Emerging markets: An evolving landscape—Technology

Martin Currie believes emerging markets are no longer dominated by commodities and cyclicals. The asset class has global technology leaders that offer innovative products and services, as well as domestic companies which are capitalising on enhancements in digitisation.

IMPORTANT LEGAL INFORMATION

This material is intended to be of general interest only and should not be construed as individual investment advice or a recommendation or solicitation to buy, sell or hold any security or to adopt any investment strategy. All investments involve risks, including possible loss of principal. There is no guarantee that a strategy will meet its objective. Performance may also be affected by currency fluctuations. Reduced liquidity may have a negative impact on the price of the assets. Currency fluctuations may affect the value of overseas investments. Where a strategy invests in emerging markets, the risks can be greater than in developed markets. Where a strategy invests in derivative instruments, this entails specific risks that may increase the risk profile of the strategy. Where a strategy invests in a specific sector or geographical area, the returns may be more volatile than a more diversified strategy.

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