EM equities: a year of positive inflection

In 2022, Emerging Markets (EM) equities sold off on heightened risk aversion associated with geopolitical risk, reactive Fed monetary tightening and the strict Zero Covid enforcement policy enacted by its largest economy and the stock market, China.

While 2023 is set to see the global economic backdrop remain challenging, the EM stock market performance is likely to behave much more positively and offers an exciting investment opportunity.

Ashmore expects three related positive inflections to drive EM performance, namely:

• a reopening of China
• lower global inflation
• for EM economic growth to accelerate compared to the developed world

These global drivers should improve sentiment and allow EM equity multiples to re-rate from current depressed levels. Meanwhile, EM earnings expectations have already been revised to prudent levels, which should see greater price stability and the prospect of positive surprises. Overall, this leaves EM equities well-placed to deliver strong absolute returns and to outperform developed markets.

Click here to read Ashmore’s paper.