Emerging markets outlook

Emerging market assets have recently come under scrutiny as investors weigh the risks and rewards of this volatile asset class. In a recent interview with CNBC Africa, Eric Robertson, Global Head of FX, Rates and Credit Research at Standard Chartered Bank, highlighted the current landscape of emerging markets and the opportunities and challenges they present. Robertson emphasized that while emerging market assets are currently undervalued, political uncertainty and currency volatility remain key deterrents for investors. Despite the attractive valuations, many investors have been hesitant to re-enter the market due to these factors. Robertson also pointed out the importance of selective investing in emerging markets, focusing on countries with current account surpluses like Korea, Taiwan, and Singapore, which are more resilient to external shocks. He noted that these countries are not being affected to the same degree as countries with current account deficits like Turkey and Argentina. Robertson debunked the notion of treating the entire emerging market complex as one homogenous entity, stressing the need to differentiate between countries based on their individual economic fundamentals. He cited examples of previously high-risk markets such as Russia, South Africa, Indonesia, and Mexico, which are now showing attractive valuations and appealing returns. Despite political instability and local issues in these markets, Robertson believes that international investors will find them increasingly attractive. In contrast to the favorable economic conditions in the United States, with rising interest rates and lower corporate taxes, Robertson discussed the potential overhang of these macro factors on investing in emerging markets. He highlighted that while these factors are significant, market expectations already price in much of the anticipated changes, mitigating the immediate threat to emerging markets. Robertson also assessed the impact of oil prices as a key risk factor for emerging markets, particularly for oil importers like India. He warned that a sharp increase in oil prices could pose a significant challenge to these countries, leading to a spike in costs and currency depreciation. Overall, Robertson's insights shed light on the complexities of investing in emerging markets and the importance of thorough risk assessment and selective portfolio management strategies to navigate the ever-changing landscape of global markets.