Clouds gather over emerging markets

Emerging markets had a good 2016, says Andrew Van Sickle. But what does next year hold?


Emerging markets led by China are forging ahead
(Image credit: This content is subject to copyright.)

Emerging markets had a good 2016. The MSCI Emerging Markets index outperformed developed-market stocks until November, and is now around 7% up for the year. China's recovery, which helped drive a commodities rebound, the easing recessions in Brazil and Russia and loose global monetary policy all bolstered sentiment. But emerging-market stocks "are unlikely to have it so easy" in 2017, says Capital Economics.

Trump's arrival is stoking concern over protectionism always a major headache for developing states because they depend more on trade than their industrialised counterparts. With Trump threatening to name China a "currency manipulator", geopolitical tension "will probably affect Asian markets already under pressure from rising US rates", note Roger Blitz and Elaine Moore in the Financial Times.

A higher yield on US assets draws capital away from emerging markets, a trend likely to accelerate if tightening happens faster than anticipated. China will be wary of racking up too much more debt, so it may withdraw some stimulus this year. Low valuations are bullish, however, and may help if political jitters settle. Russia could prove a bright spot given Trump's pro-Putin proclivities: he may soften Russian sanctions. Throw in the oil revival, says the FT's Eric Platt, and it's no wonder investors are already piling into Russian funds.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up
Andrew Van Sickle

Andrew is the editor of MoneyWeek magazine. He grew up in Vienna and studied at the University of St Andrews, where he gained a first-class MA in geography & international relations.

After graduating he began to contribute to the foreign page of The Week and soon afterwards joined MoneyWeek at its inception in October 2000. He helped Merryn Somerset Webb establish it as Britain’s best-selling financial magazine, contributing to every section of the publication and specialising in macroeconomics and stockmarkets, before going part-time.

His freelance projects have included a 2009 relaunch of The Pharma Letter, where he covered corporate news and political developments in the German pharmaceuticals market for two years, and a multiyear stint as deputy editor of the Barclays account at Redwood, a marketing agency.

Andrew has been editing MoneyWeek since 2018, and continues to specialise in investment and news in German-speaking countries owing to his fluent command of the language.