Despite the challenges, there are selective opportunities in markets such as technology in Taiwan and some Latin American regions, while India could see a modest recovery if external factors stabilize.
The choice of donald trump generated a difficult environment for emerging markets (EM), with an increase in US bond yields, one dollar stronger and growing uncertainty over US economic policies, which has a negative impact on investor sentiment, according to Geoffrey Dennis, an independent emerging markets commentator.
Dennis explained to CNBC that rising US bond yields, which could reach as much as 5% in the next 12 to 18 months, and the strengthening dollar, are key factors driving capital outflows. emerging markets. “What this does is it tends to draw money out of emerging markets” he said, adding that this trend has been evident since the US presidential election on November 5.
And since Trump won the election, Latin American currencies recorded significant losses, led by the Mexican and Chilean pesos.
About India
Regarding India’s situation, Dennis mentioned that the country tends to remain vulnerable due to its high valuations. However, despite the significant market correction, the growth story remains strong. “If there is a stabilization for a while in some of these key factors, like bond yields and the dollar, we will see India start to make a modest recovery,” Dennis said. Despite vulnerability, India could see gradual improvement if external factors stabilize.
Comparing emerging markets with developed markets (MD), Dennis noted that in the current situation, he prefers developed markets. “Right now, I tend to prefer, at the margin, developed markets over emerging markets,” he said.
However, Dennis also highlighted that he still sees selective opportunities within emerging markets. He mentioned Taiwan’s tech sector, the ASEAN region and some Latin American markets that have been oversold as areas that could still offer interesting opportunities.
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Dennis also discussed the impact of Trump’s policies on inflation and interest rates. He noted that despite expectations that the U.S. Federal Reserve will cut interest rates four times next year, he estimates the reduction will be more moderate, around two cuts or possibly even less.
Inflation in the US is currently around 2.5%, and core inflation is slightly above 3%. In this context, Federal Reserve Chairman Jerome Powell recently described the performance of the US economy as “remarkably good”, which has allowed the central bank to gradually reduce interest rates. Powell added that there are no signs that there is a need to rush to lower interest rates, noting that the current economic strength gives the central bank the ability to make cautious decisions.
Source: Ambito
I am an author and journalist who has worked in the entertainment industry for over a decade. I currently work as a news editor at a major news website, and my focus is on covering the latest trends in entertainment. I also write occasional pieces for other outlets, and have authored two books about the entertainment industry.
