Emerging market equities are set to resume their outperformance, a senior strategist has said.
Maarten-Jan Bakkum, senior emerging markets strategist at NN Investment Partners, notes that emerging market equities only underperformed by two percentage points during the market correction.
They will resume their outperformance versus developed market equities “after proving their resilience during the global correction”, he said.
Traditional weak links in emerging markets – such as Turkey, Brazil and Colombia – were not responsible for the underperformance, having held up well and even outperforming the asset class average, NNIP analysis showed.
The only market that clearly underperformed was China, Bakkum said.
“The Chinese market and particularly the Chinese Internet names were the segments that had inflated the most within global emerging markets during the previous months.”
NN IP anticipates that the relative outperformance trend in equities that started two years ago will be sustained as long as the rising bond yields in the US and Europe do not force emerging market central banks to tighten policy, thereby keeping financial conditions in those market easy and supporting the domestic demand growth recovery.
A number of investment professionals in the UK recently indicated they were less certain about emerging market equities.
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