Left Menu
Development News Edition

Wall St Week Ahead-Investors bet emerging markets will weather coronavirus impact

Wall St Week Ahead-Investors bet emerging markets will weather coronavirus impact

Investors are edging back into emerging markets, even though worries about the coronavirus's impact on global economic growth have clouded prospects for the boom-and-bust asset class.

Nearly $730 million flowed back into emerging markets exchange-traded funds (ETFs) in the past week, according to Lipper, after two straight weeks of outflows that accompanied sharp declines in the stocks and currencies of developing countries. The MSCI Emerging Markets Index, which measures stock performance, has rebounded 4% from its early February low, though it remained down on the year. Another index measuring emerging markets currency performance was still sharply lower, reflecting the slide in a range of currencies from Asia to Latin America.

As of Friday, the coronavirus has infected 63,581 people and killed 1,380. Still, investors have grown more hopeful that economic damage will be limited. Before the outbreak, emerging markets stocks had steadily climbed since early December as analysts forecast a re-acceleration of global economic growth and the United States and China agreed upon a Phase 1 trade deal. Chinese equities make up roughly a third of the weighting in the MSCI Emerging Markets Index. Emerging markets ETFs have seen a steady stream of money pouring in since late October and have not seen outflows on a monthly basis, Lipper data showed.

"The valuations are really compelling, and we were seeing signs of an economic recovery," said Robert Phipps, director at Per Stirling Capital Management. "Once the coronavirus is put on pause, I think that will become the primary trend again." Phipps, who did not hold emerging markets stocks, has added them so that they now make up about 6% of his portfolio. A weaker dollar would likely compel him to boost that position, he said. Countries that have borrowed in dollars would then find it easier to service their debt.

Other financial institutions, including BlackRock, JPMorgan and UBS Global Wealth Management, are also sanguine on the prospects for emerging markets in 2020, even though the asset class has underperformed U.S. stocks for more than a decade. Emerging markets stocks have been more resilient of late in large part because they have languished for so long, said Michael Purves, chief executive of Tallbacken Capital Advisors.

"There's not really a case to sell them, because they're already massively underowned," he said. Options activity also points to investor resilience. The gap between the Cboe Emerging Markets ETF Volatility Index and the Cboe Volatility Index, seen as an indicator of investor risk aversion, stood at 2.95 points. That compares to a 7.25-point gap in May 2019, when trade tensions between the U.S. and China stood near their peak.

The economic impact of the coronavirus outbreak remains unknown. Some analysts have estimated that China's yearly gross domestic product growth could fall to between 4% and 5%, down from the 6% annual growth the Chinese government previously estimated. But some investors expect the shortfall in growth to be largely contained to the first quarter, which would give China's economy room to catch up later this year.

"It's a relatively short-term factor," said Jim Besaw, chief investment officer at GenTrust. "We probably won't be talking about it in April and May."

(This story has not been edited by Devdiscourse staff and is auto-generated from a syndicated feed.)

Download The Devdiscourse News App for Latest News.



Future of Food: Technology fostering the road to global food security

Technological innovation can help address most of the pressing issues facing the world today including food security by enhancing productivity, improving financial services, managing resources, addressing environmental concerns, etc....

Conspiracy theories on COVID 19: Legislators, Scientists, and Journalists all joined the Caravan

Conspiracy theories are not new for virus epidemics. There have been conspiracy theories on HIV-AIDS, Polio Vaccines, Ebola Virus, and several other diseases as well. However, what makes the 2019 Novel Coronavirus different from others is ...

Now it’s a war, Uganda deploys army to combat locust swarms

Its for the first time after 1986, the locust swarms have attacked Uganda twice in a season. With the increasing number of countries of Africa under attack by locust swarms, the problem seems to have taken a regional paradigm. Its very diff...

Top 10 Fake News, Myths and Realities on 2019 Novel Coronavirus COVID 19

With nearly 1500 deaths by January 14 and around 65,000 infections in China, the Novel Coronavirus 2019 has become one of the worst health epidemics of the 21st Century. However, 8,573 people have been cured but the rumor mongers are a...


Latest News

Prejudices, violence vitiate search for truth: President

Prejudices and violence vitiate the search for truth, President Ram Nath Kovind said on Saturday and noted that Mahatma Gandhi walked ceaselessly in search of truth, which ultimately encompasses every positive attribute that enriches the un...

As businesses nosedive, Shaheen Bagh shopkeepers meet advocate Shahni with their demands

While the Supreme Court-appointed interlocutors continue to hold talks with the protesters against the Citizenship Amendment Act CAA and the National Register of Citizens NRC in Shaheen Bagh, the shopkeepers from Kalindi Kunj market met adv...

PM Modi to address 62nd edition of 'Mann Ki Baat' tomorrow

Prime Minister Narendra Modi will address the 62nd edition of his monthly radio programme Mann Ki Baat at 11 am on Sunday. In his previous address on January 26, the Prime Minister urged people to serve Mother India with a new-found resolve...

Sopore Police arrests terrorist associate linked to LeT

Sopore Police have arrested a terrorist associate linked to Lashkar-e-Taiba. The terrorist associate has been identified as Muzamil Ahmad. As per investigations, he was providing logistic support and shelter to active terrorists of LeT oper...

Give Feedback