The emerging market landscape at the moment is characterized by a strong dollar and tightening US Dollar liquidity, by very high energy prices, and by new geopolitical realities.
That is creating some strong opportunities in some commodity expert economies, including the Arab Gulf, but also in markets like Brazil, and Mexico, and Indonesia. It’s creating some significant challenges for some big energy importing more cyclical economies, including Korea and Taiwan.
And then, the new geopolitical reality is creating some substantial challenges, particularly for China, which has struggled with its post-COVID recovery, and is now facing increased economic conflicts with the West. And also, some challenges for some countries, but also, economies, that are caught, perhaps, in the middle, and Turkey would be an example of that.
So, we find some substantial opportunities, particularly in, perhaps, some of the more commodity-centred economies that had difficult years in the 2013 to 2018 period when commodity prices were very low. But they are now doing extremely well.
We think one of the consistent patterns in emerging markets is that the investing world veers between excess pessimism and excess optimism about different economies and markets. That feeds into what happens in those.
We’re seeing the recovery from deep pessimism in markets like Brazil, and Mexico, and Indonesia. We’re seeing new-found optimism around some of the Arab Gulf markets. And at the same time, we’re seeing increasing pessimism about markets like China, particularly. Also, some of the Central European markets.
Those will drive what happens in the near term, but none of those will be permanent states. And at some point in the next ten years, people will realise that they’ve been excessively optimistic about Brazil and excessively pessimistic about China.