Maple-Brow Abbott says emerging markets ahead in the economic cycle should see capital flow in 2024
\nWeaker US dollar in 2024 could have an upside to emerging market companies focused on exports
\nConfidence could return to Chinese market in 2024, where valuations are within 10% of their 20-year lows<\/p>\n
Thinking of investing in global emerging markets in 2024? Maple-Brown Abbott head of global emerging markets John Moorhead reckons several factors point to a stronger year for global emerging markets in 2024.<\/p>\n
He says a likely peak in interest rates, attractive valuations and higher rates of economic growth should see capital flow to select emerging markets further ahead in the economic cycle.<\/p>\n
\u201cEmerging economies have generally been ahead of the curve in fighting inflation, helped by moving early with rate rises and maintaining fiscal discipline,\u201d Moorhead says.<\/p>\n
\u201cThat leaves many emerging market governments and central banks well placed to stimulate for growth.\u201d<\/p>\n
Moorhead says for example, Brazil was one of the first central banks globally to raise rates and is now in an easing cycle.<\/p>\n
\u201cWith a balanced federal budget, still high real rates and a stock market trading around 8x forward earnings, we believe Brazilian equities are well placed for further gains,\u201d he says.<\/p>\n
\u201cFor the first time in close to two years, the broad emerging markets index is seeing a sustained lift in the outlook for earnings.<\/p>\n
\u201cAt the bottom-up level, we are uncovering exciting opportunities in companies that are already reporting strong fundamentals.\u201d<\/p>\n
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ETF industry expert Kanish Chugh told\u00a0Stockhead <\/em>a forecasted weaker US dollar in 2024 could have an upside to emerging market currencies and in turn equities. \u201cA weak US dollar increases import costs but boosts exports as companies see their products priced more competitively,\u201d he says.<\/p>\n Chugh says another understated benefit of a weaker US dollar is capital inflows and access to capital.<\/p>\n \u201cShould the Fed\u2019s rate policy soften and even reverse, emerging market economies and companies could start to attract more investments and find it easier to borrow more money to fuel growth,\u201d he says.<\/p>\n \u201cHistorically we have seen a negative relationship between the US dollar and EM equities with EM equities gaining roughly 4% for each 1% of US dollar weakness.\u201d<\/p>\n \u00a0<\/p>\n Equity markets in China and Hong Kong finished as the weakest among major global indices in 2023, suffering due to geopolitical tensions, a slow economic rebound, and uncertain policies.<\/p>\n The China CSI300 (CSI300) Index saw a decline of 11%, while Hong Kong\u2019s Hang Seng Index (HIS) experienced a steeper fall of 14%.<\/p>\n Maple-Brown Abbott, head of Asia Will Main, believes Chinese equities remain a contrarian opportunity and confidence could return to the market in 2024, where valuations are within 10% of their 20-year lows.<\/p>\n \u201cThree years of equity market declines have the left the market cheap, unloved and under-owned,\u201dhe says.<\/p>\n \u201cFrom an equity market return perspective, experience tells us that things only need to be \u2018less bad\u2019 to see animal spirits kick in and stock prices move higher.<\/p>\n \u201cWe are optimistic on the outlook for China and believe there are a number of attractive opportunities for investors.\u201d<\/p>\n Chugh says China has really struggled from Covid-19 in the past three or four years with extended shutdowns, a softening property market and a prolonged recovery along with geopolitical events.<\/p>\n \u201cIt has struggled to achieve the rebound we\u2019ve seen with some of the Western nations out of Covid,\u201d he says.<\/p>\n \u201cIn emerging markets you have two distinct types of companies, those that are very much focused on domestic markets and that\u2019s where we\u2019ve seen for example in India companies do very well just focusing on local consumption and growth.<\/p>\n \u201cOn the other side in China, we are seeing a greater focus on export driven companies, for a great example you\u2019ve got BYD which has really shot up the ranks as a leading producer and seller of electric vehicles not just in China but globally.\u201d<\/p>\n Chugh says present in 70 countries, BYD very focused on its international strategy and exported over 600,00 cars in 2023, eight times more than it did in 2020.<\/p>\n \u00a0<\/p>\n Moorhead believes political events in emerging markets may create idiosyncratic investing opportunities.<\/p>\n \u201cEmerging markets face a busy election period over the coming 12 months,\u201d he says.<\/p>\n \u201cTaiwan, Indonesia, India, South Korea, India, South Africa and Mexico are all expected to hold elections before the end of 2024.<\/p>\n \u201cIn our experience in emerging markets, uncertainty arising from campaign policy announcements as well as the election results can create shorter term market volatility, which can result in longer-term investment opportunities.\u201d<\/p>\n Chugh says we live in a world where countries are now very much dependant upon each other, so maintaining diplomacy is important.<\/p>\n \u201cChina will continue to some dependency upon Western nations for natural resources to come out of its slump, to rebuild and get going another infrastructure boom for example,\u201d he says.<\/p>\n \u00a0<\/p>\n Chugh says when we think of emerging markets many investors are focused on China and India.<\/p>\n \u201cWhen you think of emerging markets you\u2019ve got Brazil and South American countries,\u201d he says.<\/p>\n \u201cYou\u2019ve got countries that have really struggled economically and politically as well so I think you\u2019ll find there are some interesting dynamics to play out beyond Asian markets.\u201d<\/p>\n He says you\u2019ve also got the Tiger Nations of Asia including Thailand,\u00a0 Vietnam, Indonesia which have driven a lot of emerging market growth.<\/p>\n \u201cWhen you think of emerging markets it\u2019s not just one or two countries,\u201d he says.<\/p>\n \u201cWhen you look at the portfolios of emerging market funds and indexes etc it is China predominantly but there are other countries which will also start to do very well.\u201d<\/p>\n Worth reading: The best year since the GFC? These experts are ready to go big on ASX small caps this year.<\/strong><\/a><\/p>\n The views, information, or opinions expressed in the interview in this article are solely those of the interviewee and do not represent the views of Stockhead. Stockhead has not provided, endorsed or otherwise assumed responsibility for any financial product advice contained in this article.<\/em><\/p>\n <\/span><\/p>\n The post \u2018Ahead of the curve in fighting inflation\u2019: Why these experts are betting on emerging markets in 2024<\/a> appeared first on Stockhead<\/a>.<\/p>","protected":false},"excerpt":{"rendered":"
\nChugh says currency has a big impact on a lot of emerging markets.<\/p>\nDon\u2019t discount China in 2024<\/h2>\n
Geopolitical events may have impact<\/h2>\n
Think beyond China and India for emerging markets<\/h2>\n