Aberdeen Standard Investments has expected structural growth in Chinese equities and emerging market (EM) bonds in 2020, as these assets offer diversification and attractive potential risk-adjusted returns.
According to Mark Baker, investment director – emerging market debt at Aberdeen Standard Investments, EM growth remained relatively robust, in contrast to economic stagnation in the developed countries, and he expected the growth differential between EM and developed markets to widen in 2020, driven by economic recovery in a handful of large emerging economies.
“There is scope for incremental policy rate cuts in a number of EM economies including Brazil, Mexico, Indonesia, India and the Philippines. However, rate-cutting cycles are now at an advanced stage, meaning duration gains may be modest in the year ahead,” he said.
“Closer to home we also see attractive opportunities in Asian local markets, particularly in China and India. Continued interest rate reform will provide a supportive background for duration in China, while Indian local currency corporate bonds offer both attractive income returns and scope for capital gains.”
At the same time, the major headwinds for investors in EM included further dollar strength, the continuation of US exceptionalism, a deeper Chinese slowdown and an escalation in trade tensions.
As far as China was concerned, Aberdeen’s head of China equities, Nicholas Yeo, said that despite...