Capital IdeasTM
Investment insights from Capital Group
Equity
F. Chapman Taylor
Lisa Thompson
Brad Freer
Kent Chan
The post COVID-19 era has seen a reset in financial markets on many levels – interest rates, geopolitics and growth paradigms. It's also led to a redrawing of the landscape for emerging markets (EM).
We believe the next phase of growth for EM will be different than the past 20 years. China's economy has matured and is going through a difficult patch of reforms. Geopolitical tensions and the world's energy transition are driving foreign investment into a broader mix of developing countries for manufacturing and natural resource needs. And government-led reforms are changing the trajectory of some developing countries, such as India and Indonesia.
Many asset managers, including us, have increased their capital market assumptions for both EM equities and debt. We believe the outlook for EM is constructive over the medium-term and will expand to markets that have not been front-and-centre for investors.
Here we discuss the macro variables as well as some of the trends and opportunities we are seeing across markets and industries.
Returns among large EMs have diverged post-COVID
Data as at 30 September 2023. Returns reflect MSCI India Index, MSCI Mexico Index, and MSCI China Index. Five-year time period shown to reflect returns pre and post-COVID. Sources: MSCI, RIMES
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