Friday, 21 June 2019
Slowing world trade is causing global GDP and earnings growth to be revised downward. In response the Fed and the ECB are shifting towards a stance of monetary easing, which is supportive of the economy and of financial markets. Several EM Central Banks, including Russia and India, are also lowering interest rates. Moreover, we expect the US-China trade dispute to be resolved in due course. GDP and corporate earnings growth in India, China as well as various EM’s that are recently emerging from recession are superior to Developed Markets.
After strong underperformance in 2018, even after a rally in Q1 2019, Global Emerging Markets valuation is still on a large discount to Developed Markets. As EM bond yields fall, the EM equity risk premium valuation also becomes more attractive. We maintain Global Emerging Market Equities on a moderate Overweight position, favouring Chinese and Indian markets.
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