Investors’ “smart money” heads for emerging markets

With Asia having dodged the worst of the pandemic and stockmarkets and the Regional Comprehensive Economic Partnership promising a bright future, Western investors are flocking into emerging market stocks.

Asian economies, including China, Japan, Australia and many southeast Asian nations, have signed the Regional Comprehensive Economic Partnership (RCEP). Asian economies are already in good spirits, says Laura He on CNN. The region has largely dodged the worst of the pandemic. The RCEP deal will only reinforce the eastward drift of the global economy’s centre of gravity. 

Not everywhere in Asia is so fortunate. India’s economy has been hit hard by Covid-19, but its BSE Sensex index hit a new record high this week on positive vaccine trial news. The index has gained 69% since the mid-March low. Indian equities have also been boosted by the unwinding of US election risks, says Buttonwood in The Economist. With less to worry about at home, American money managers are ready to go shopping abroad.

Emerging markets certainly have some catching up to do: the MSCI Emerging Markets Index has gained just 3% over the past ten years and remains short of its 2007 all-time high. While some east Asian emerging markets have soared of late, Brazil and South Africa have lagged. The case for emerging markets has long rested on powerful demographic trends, say Tony Roth and Meghan Shue on CNBC.com. But today the central role of Asian economies in the “digital revolution” is just as important. 

As well as manufacturing most of the world’s gadgets, Asian consumers are also the most enthusiastic digital adopters. The region’s economies are “years ahead” of America’s when it comes to “contactless payments” and “facial recognition software”. Post-pandemic, the likes of Vietnam, Indonesia and India are likely to get a boost as multinational companies re-think their supply chains. “The smart money” is betting on emerging markets.

Recommended

Should you be worried about energy windfall tax proposals?
Energy

Should you be worried about energy windfall tax proposals?

Calls have been growing for a windfall tax on UK oil and gas producers. It's a popular idea, but is it a good one? And what does it mean for investors…
24 May 2022
Four high-quality US stocks to give shelter from the storm
Share tips

Four high-quality US stocks to give shelter from the storm

Professional investor Timothy Parton of the JPMorgan American Investment Trust picks four solid US stocks to buy now.
24 May 2022
Three undervalued mid-cap stocks with attractive prospects
Share tips

Three undervalued mid-cap stocks with attractive prospects

Professional investor Katen Patel of the JPMorgan Mid Cap Investment Trust picks three fast-growing mid-cap stocks to buy now.
24 May 2022
Could a stronger euro bring relief to global markets?
Currencies

Could a stronger euro bring relief to global markets?

The European Central Bank is set to end its negative interest rate policy. That should bring some relief to markets, says John Stepek. Here’s why.
24 May 2022

Most Popular

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
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
Barry Norris: we’re already in the 1970s. Here’s how to invest
Investment strategy

Barry Norris: we’re already in the 1970s. Here’s how to invest

Merryn talks to Barry Norris of Argonaut capital about the parallels between now and the 1970s; the transition to “green” energy; and the one sector w…
19 May 2022