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Capital IdeasTM

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Equity
Emerging markets: Positive signs even as China slows
F. Chapman Taylor
Portfolio Manager
Lisa Thompson
Portfolio Manager
Brad Freer
Portfolio Manager
Kent Chan
Investment Director
October 24, 2023
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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

d7_returns-among-large-ems-have-diverged-post-COVID_916px.png

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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F. Chapman Taylor is an equity portfolio manager at Capital Group. He has 32 years of investment industry experience and has been with Capital Group for 28 years. He holds an MBA in finance and strategic planning from the Wharton School of the University of Pennsylvania, and a bachelor’s degree in physics and theology from Tulane University. Chapman is based in Washington, D.C.

Lisa Thompson is an equity portfolio manager at Capital Group. She has 34 years of investment industry experience and has been with Capital Group for 28 years. She holds a bachelor’s degree in mathematics from the University of Pennsylvania and the Chartered Financial Analyst® designation. Lisa is based in New York.

Bradford F. Freer is an equity portfolio manager with 33 years of investment industry experience (as of 12/31/2023). He holds a bachelor’s degree in international relations from Connecticut College and is a CFA® charterholder.

Kent Chan is an equity investment director at Capital Group. He has 31 years of investment industry experience and has been with Capital Group for seven years. He holds a bachelor’s degree in political economics from the University of California, Berkeley. Kent is based in San Francisco.

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