Emerging market equities (EME) suffered heavy losses during 2018, however, they finished the year more strongly in relative terms, sustaining a 7.5 per cent loss of value during Q4, compared with a 13.5 per cent slide for the S&P500 and a 13.4 per cent decline for the MSCI World.
That’s according to one of a pair of new reports from CAMRADATA, a provider of data and analysis for institutional investors.
The second report reveals that emerging market debt was also under pressure for much of 2018, from a strong US dollar and dynamic US economic performance. But the sector finished the year in better shape, with a weaker US outlook for 2019 and more dovish signals from the Federal Reserve, easing the stress on EM bond issuers of servicing their USD-denominated debt.
Sean Thompson, Managing Director, CAMRADATA says, “Emerging market equities battled for much of 2018, in the face of a rising US dollar and fallout from the US-China trade standoff. Going forward, many emerging markets are working to diversify from a reliance on US dollar-sensitive exports to developed economies.
“At a time of slowing global growth, emerging markets are expected to grow substantially faster during 2019 than advanced economies, according to International Monetary Fund forecasts. For countries under fire during 2018, such as Argentina, Turkey and Brazil, there appears to be some early signs of recovery.
“Valuations for EM debt and currencies also appear attractive by historical standards. Heavy sell offs during 2018 have left EM bond spreads substantially higher (and pricing lower) than 12 months ago and this provides an entry point for investors with the appropriate risk appetite. But this is a sector prone to large performance variance, so strong country analysis will be needed to spot the best opportunities this year.
“Investors can keep abreast of issues that are likely to affect the markets using CAMRADATA Live. This tool monitors the strategies of asset managers, keeping investors up to date on what’s happening across hundreds of asset classes and helping ensure they make informed investment decisions.”
