What’s next for emerging markets?

Emerging markets look set to have another challenging year in 2015.

Emerging markets trade on "attractive" valuations, as Russell Investments notes. They are collectively on a forward price/earnings ratio of 11 and at the biggest price-to-book discount to developed markets in ten years. But "the cycle... keeps us cautious".

China is slowing; commodity prices are falling; and the US dollar is rising. The prospect of higher US interest rates draws capital away from traditionally risky assets such as emerging markets.

Advertisement - Article continues below

Note too, says Gillian Tett in the FT, that many emerging-market firms have borrowed in dollars but are servicing the debt in local currencies.

So it's not surprising that HSBC expects emerging-market growth in 2015 to fall from this year's 4.2% while the developed world gathers momentum.

With the US continuing to lead the charge, the best bets in emerging markets may be the countries most closely linked to it, says Lex in the FT. Mexico is highly geared to its neighbour. South Korean exporters, notably car and electronics firms, will profit from a revitalised US consumer.

Meanwhile, we think that markets with large domestic economies that can offset external weakness, such as Indonesia and the Philippines, should keep doing well.

Indian growth is on track to step up a gear thanks to government reforms, as Morgan Stanley notes, and embattled Brazil is still cheap enough to justify a long-term investment.




Bullish investors return to emerging markets

The ink had barely dried on the US-China trade deal before the bulls began pouring into emerging markets.
27 Jan 2020

The currencies to bet on this year

The US dollar could be set to weaken this year, while the euro, Canadian dollar and the Swiss franc could be good bets for optimistic traders.
17 Jan 2020
Investment strategy

Beware the hidden risks when investing in emerging markets

Emerging markets look cheap compared with developed countries, but earnings may be less trustworthy.
23 Dec 2019

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019

Most Popular


These seven charts show exactly why you must own gold today

Covid-19 is accelerating many trends that were already in existence. The rising gold price is one such trend. These seven charts, says Dominic Frisby,…
3 Jun 2020

Disease, rioting and mass unemployment – so why are markets soaring?

Despite some pretty strong headwinds in the last year, America’s S&P 500 stock index is close to all-time highs. John Stepek explains why markets seem…
4 Jun 2020
EU Economy

Why a stronger euro is good news for investors

The fragile state of the eurozone has for a long time brought the threat of deflation. But the ECB’s latest moves have dampened those fears. John Step…
5 Jun 2020