1. Newsroom
  2. Emerging Markets: growth potential unaffected by the rising dollar
Menu
Analisi 20.07.2018

Emerging Markets: growth potential unaffected by the rising dollar

Emerging Markets: growth potential unaffected by the rising dollar

The decline in emerging-market currencies since March is the result of the dollar rally. However, emerging markets are still benefiting from synchronised growth in the global economy. That momentum provides a good opportunity to move back into this asset class.


2018 started well for emerging markets, until they peaked on 20 March. Since then, they have suffered a severe correction, while the dollar has rallied equally significantly against the main emerging currencies. Once again, a rising dollar has been accompanied by a decline in emerging markets. Emerging-market countries remain dependent on action taken by the Fed and movements in the dollar. The strength of the US currency is making dollar-based financing more expensive for companies in those countries, and prompting monetary-policy adjustments in many economies.

Since the end of March, emerging currencies have fallen 10% on average against the Greenback, but have not seen any decline against the euro or sterling. These currency movements highlight the strength of the dollar, which is mainly the product of the US economy’s relatively strong growth and Fed monetary tightening rather than any real weakness in emerging currencies. In euro terms, the MSCI Emerging Markets index is down only 5% year-to-date, while the MSCI World index is up 3.5%.

Synchronised growth in the global economy

In sector terms, cyclical stocks – i.e. those exposed to the current upward phase of the economic cycle such as oil, gas and commodity stocks – are holding up well during this correction, as are more defensive sectors like pharmaceuticals.

Emerging-market sectors performing less well at the moment include finance, manufacturing and telecoms. If concern about global growth were behind the current correction, defensive stocks would have outperformed. The fact that they have not shows the resilience of global markets so far.

Some countries are benefiting from rising hydrocarbon prices, and numerous emerging-market cyclical stocks have held out well against the correction. This situation is likely to continue as long as the strong dollar does not significantly weaken the current phase of synchronised growth. Confidence levels among consumers and businesses remain historically high, supporting that scenario.

Although political problems in Turkey, Argentina and Brazil are weakening their economies, the damage has not yet spread elsewhere. New US sanctions against Russia in early April came as a surprise and adversely affected the Russian market. However, relations between Washington and Moscow are improving and a bilateral summit is being organised, which should help optimism to return to the Russian market. In the meantime, Saudi Arabia and Argentina look likely to be added to the MSCI Emerging Markets index in May 2019, which will put those countries’ stocks on the radar of major investment funds.

UBP Emerging equities

NEGRE Mathieu_p-1.jpg

Mathieu Nègre
Head of Global Emerging Equities

Analisi

Gestione discrezionale – le redini sono in mano vostra

Ogni cliente ha aspirazioni e obiettivi unici, così come è unico il nostro approccio alla gestione di portafoglio discrezionale.

Leggete di più
Expertise

Swiss & Global Equities

Why Swiss equities now? This market offers equity investors the stability and agility they need to navigate this volatile period. 

Read more
Expertise

European Equities

European equities offer unrivalled opportunities in terms of breadth of sector and market exposure.

Read more

Le news più lette

Analisi 10.02.2021

COVID-19: UBP vi terrà aggiornati

Dalla comparsa del coronavirus, UBP accompagna e sostiene i suoi clienti nel contesto inedito di questa crisi sanitaria mondiale. La Banca vi aggiorna regolarmente sull’adeguamento dei suoi piani alle regole precauzionali fissate dalle autorità e condivide con voi le più aggiornate analisi dei suoi esperti sulle conseguenze della pandemia per l’economia mondiale e i mercati finanziari.

Analisi 17.12.2020

UBP Investment Outlook 2021

Il mondo nuovo
Analisi 24.11.2020

Hidden gems in Swiss & European small caps

Small and mid caps have traditionally recorded higher growth rates and investment returns over the long term than large caps: it is easier to generate a dynamic growth rate from a smaller base. Swiss and European small and medium-sized capitalisations – so-called ‘SMID caps’ – also tend to provide investors with ‘pure play’ exposure to major secular growth trends.


Altro da leggere

Analisi 14.04.2021

The vaccine disrupting the pharma industry

UBP talks to Stéphane Bancel, Moderna CEO, to learn how the mRNA technology not only made one of the first COVID-19 vaccines possible, but, more importantly for investors, has the potential to disrupt the broader pharmaceutical industry in its wake.

Analisi 05.04.2021

Transitioning to a Brave New World

Volatility is back in Chinese equity markets: after rallying 90% from its trough in March 2020 to a peak in February 2021, MSCI China has fallen by 16% over the past month.

Analisi 24.03.2021

Gestione discrezionale – le redini sono in mano vostra

Ogni cliente ha aspirazioni e obiettivi unici, così come è unico il nostro approccio alla gestione di portafoglio discrezionale.