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Why ‘resilient’ emerging markets are weathering this storm better than the 2008 crisis


Al Bryant, Head of the River and Mercantile Emerging Markets team, comments on why he believes EM’s are holding up better during this crisis than they did in 2008…“Emerging markets have taken a much lesser blow in the current crisis than they did during the financial crash of 2008. Their banks are in better positions today to support the downturn and recovery than the last major crisis, but they have improved many aspects of their finances beyond just the banking sector in the last decade. This has been acknowledged in the fixed income market, and one knock-on effect of this improved appreciation is that the EM equity index has thus far been more resilient versus the MSCI World compared to the GFC.

“During the GFC, EM equities were down 53 per cent versus 40 per cent for the MSCI World in USD terms in 2008. This year-to-date, the spread is reduced to about 2.5 per cent. China itself is well ahead of the Developed World at a loss of “only” 10 per cent
“We suspect Emerging Markets will have a confidence boosting crisis. This new source of risk, Coronavirus, has quickly followed the US China trade war, and is likely to further embolden diversification of global supply chains. This will benefit SE Asia and Latin America as corporate and government investments are made to broaden capacity and bolster self-reliance. China will continue to diversify its economy towards consumption, making its growth story increasingly less reliant upon the Developed World. The opportunities in EMs remain attractive and will be key drivers in the recovery.”

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