Clouds gather over emerging markets

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

16-12-22-Mao-1200

Emerging markets led by China are forging ahead

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.

Recommended

What's behind Sri Lanka’s crippling debt crisis?
Emerging markets

What's behind Sri Lanka’s crippling debt crisis?

Sri Lanka has been hit by a triple whammy of economic shocks and has gone to the IMF for a bailout. It may just be the first domino to fall in a globa…
20 May 2022
Investor optimism ebbs in Indian stockmarkets
Emerging markets

Investor optimism ebbs in Indian stockmarkets

India’s BSE Sensex stockmarket index has fallen by almost 8% so far this year. Interest rates are on the rise, and foreign investors have been selling…
18 May 2022
Hong Kong’s brain drain
Chinese economy

Hong Kong’s brain drain

A change in the political atmosphere and a harsh zero-Covid regime has seen thousands flee the global financial hub. Does it have a future – or will S…
14 May 2022
The return of the Marcos dynasty to the Philippines
Emerging markets

The return of the Marcos dynasty to the Philippines

The Philippines has elected Bongbong Marcos as president, three decades after his family was ousted from power in a popular revolution. What does that…
12 May 2022

Most Popular

Everything is collapsing at once – here’s what to do about it
Investment strategy

Everything is collapsing at once – here’s what to do about it

Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect th…
23 May 2022
Imperial Brands has an 8.3% yield – but what’s the catch?
Share tips

Imperial Brands has an 8.3% yield – but what’s the catch?

Tobacco company Imperial Brands boasts an impressive dividend yield, and the shares look cheap. But investors should beware, says Rupert Hargreaves. H…
20 May 2022
Three high-quality FTSE 100 shares going cheap
Share tips

Three high-quality FTSE 100 shares going cheap

As stockmarkets continue to fall, bargains are starting to appear, says Rupert Hargreaves. Here, he picks three high-quality FTSE 100 shares that are …
23 May 2022