“Money managers should think twice before letting a bumpy month of losses scare them away from emerging markets,” according to a recent Bloomberg article.
The article cites comments from Société Generale cross-assets strategist Bruno Braizinha, who argues that developing countries are “better suited to withstand a global downturn than in the past,” and that any upcoming U.S. recession would be less severe than the global financial crisis in 2008. Emerging market fundamentals are, he says, “much stronger and supported by Chinese growth ” adding his recommendation for a “significant allocation” to emerging markets. “It’s the old decoupling scenario where EM remains robust in a U.S. slowdown,” he asserts.
Braizinha says he expects emerging market stocks to surpass U.S. peers and likes the outlook for Malaysia, Thailand, Indonesia and South Korea. He also favors “local debt from South Africa and Russia while Brazil and Mexico may offer appealing entry points ahead of their presidential elections.”