Since our last update, there have been a lot of positive developments, but there are still some bumps in the road. Altaf Kassam explores the key trends investors should be thinking about.
Speaker : Altaf Kassam
Hi there! A lot's happened since our last update, which was only a month ago, but a lot of it has been positive. To be sure, we still think the path is bumpy, so downside protection makes sense. And yields are still high, so fixed income is still something we think you should be actively talking about. But what's changed? It's really been the China reopening, which has surprised us with its speed and its strength.
So, what does that mean for investments? Well, obviously, that is a positive for China and Chinese equities. And we think that that is a great place to look right now. We don't think you have missed it. We think there's more to come. And when you do invest in Chinese equities, as we have said before, we think you need to be active, to have someone who is nimble, who can navigate that political risk, which is going to remain in that market.
But there's still gains to be made. And then given China's weight in emerging markets, that rebound is also being felt as China reopens in emerging market equities more broadly and in emerging market debt. And that's where we've really seen a big shift from last year to this year. What we had last year was relentless outflows in Chinese and emerging market debt broadly.
This year, those outflows have really turned back into inflows and we are seeing the rebound firstly in hard currency debt. But we think as the dollar keeps declining, that is going to feed through into local currency debt as well. So, the road still stays bumpy, but it is feeling a bit more positive than it did, say a month ago. The clouds are lifting.
You should still think about downside protection. You should still be allocating to fixed income. But China, emerging markets make much more sense right now. So, with that, thank you very much!
EMEA Head of Investment Strategy & Research
Renewed Interest in EMD Hard Currency
Against an improved backdrop for emerging market assets, there was a notable uplift in investor interest that was reflected in strong inflows for emerging market hard currency debt.
Recovery in EMD Hard Currency Inflows
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