Last year was a tough 12 months for emerging market (EM) equities. The MSCI EM Index fell by 20% in US dollar terms over the full year, battered by the Russia-Ukraine conflict, an unexpected COVID-19 resurgence in China and tightening US monetary policy.
Now, we see reasons to be optimistic. While these issues are not fully behind us, we feel that the stars are aligning for the asset class.
1. FALLING INFLATION ALLOWS EM CENTRAL BANKS TO CUT AGGRESSIVELY: Consumer price indices are falling across the world. The major issues of supply chain constraints, high shipping and energy costs and commodity scarcity seem mostly resolved. Within EM, Latin America and EMEA inflation rates rose dramatically in the second half of 2021 and into the first half of 2022.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.