Annual returns from emerging markets are likely to reduce by 20 basis points (bps), according to J.P. Morgan Asset Management (JPMAM), as growth slows in China.
Speaking on a webinar, JPMAM global market strategist, Kerry Craig, said a slowing growth in China was a natural outcome of the country moving to become a developed market.
He said: “For emerging markets, we are expecting a much more challenging growth environment going forward. There are two reasons for this, one is demographics, population growth is slowing down and that is a headwind to growth across a number of emerging market economies.
“Then the other big driver, given China’s weight in the global economy, is that China is converging towards developed market economies and it’s only natural that it will start to slow down over the next decade or so.
“That’s not a horror story we’re painting here, it’s natural that it will continue to slow down.”
He forecast a 20bps dip for annual emerging market returns to 6.6% which would have the knock-on effect of reducing global equity returns by 10bps to 5% in US dollar terms.
The MSCI Emerging Markets had returned 7.6% over one year to 24 November while the MSCI China index had lost 13.2%, according to FE Analytics.
Meanwhile, Australia was one of the strongest markets in developed markets for global growth with forecast growth of 2.2%.
However, the forecast for Australian equities had been reduced by 130 bps to 5% as JPMAM expected to see “substantial margin headwinds and likely multiple contraction”.
