Expect ‘prolonged dip’ in SEA EMs
Emerging markets (EMs) could suffer a “prolonged dip”, according to Principal Global Investors, as it will be harder to distribute the COVID-19 vaccine.
While notable exceptions were Russia, China, and India as they were developing their own vaccines, the majority of EMs were delayed in receiving the vaccine which meant high case numbers were continuing, particularly as the virus mutated.
Most affected would those economies in Southeast Asia which were heavily dependent on tourism and were being constrained by global travel restrictions, which is where forecast the prolonged dip to appear.
Seema Shah, chief global market strategist, said: “Emerging markets are unlikely to receive any meaningful vaccine supply until the most developed markets fulfill their needs. Most emerging markets will not receive a vaccine until late 2021/2022 and, even then, poor infrastructure will hamper their distribution efforts.
“There is a sense of urgency to move faster. The discovery of South African, Brazilian and UK variants of the virus is putting pressure on global vaccination efforts. Anything that impedes access to the vaccines could cause some countries to slow-walk their efforts to lift restrictions, particularly in relation to international borders,” Shah said.
According to FE Analytics, within the Australian Core Strategies universe, the emerging market sector returned an average of 11.4% over the year to 28 February, 2021, while the MSCI Emerging Market index returned 13.6%.
However, when it came to indices in Southeast Asia, MSCI Thailand, Indonesia, Malaysia and the Philippines all reported losses over the same period with the worst being MSCI Philippines which lost 12.4%.
While the markets tracked in line for the first half of the year, there was a clear breakaway in November when the EM index began rising following the development of the vaccine.
Over the same period, the best-performing EM fund was CC RWC Global Emerging Markets fund, managed by John Malloy, which returned 35%. In its February factsheet, the firm said the fund had been helped by exposure to China while Brazil exposure had been a detractor.
AUTHOR
Laura Dew
Recommended for you
Women are expected to inherit US$124 trillion through the intergenerational wealth transfer, but Capital Group has found they are twice as likely to rely on social media for advice over a financial adviser.
Challenger Investment Management has raised $350 million during the offer period for its new ASX-listed investment structure.
A week after Lonsec downgraded multiple funds from Metrics Credit Partners, rival research house Zenith Investment Partners has opted to retain its ratings for the same funds.
Strong adviser engagement has helped Praemium reach $1 billion in inflows on its Spectrum offering, with a deal with Western Australian wealth firm Euroz Hartleys expected to add as much as $2 billion.
