When it comes to investing in emerging markets the macro-economic backdrop is critical, mainly because of the importance of currencies to overhaul US dollar returns for investors.
In this short video, Alex Duffy, Portfolio Manager of the Fidelity Global Emerging Markets Fund shares his outlook and the currency environment at this point in time.
“It is important to acknowledge that in emerging markets the currency environment will always be volatile to a certain extent because of the number of currencies having unique factors driving them.” Alex explained.
In the last five years there has been a period of relatively persistent currency weakness that has eroded returns for investors within emerging markets. However over the last 18 months, Alex has seen a significant improvement in terms of trade in emerging markets as well as recovering commodity prices resulting in a more robust backdrop.
“Currencies in the most part are usually driven by terms of trade - the value of exports relative to value of imports - which is very healthy and supportive of EM at this point in time.”
Alex is also positive in his outlook for the region.
“Currencies will always be volatile, and politics will always play a role but the major over- riding economic factors I believe are far healthier. A supportive currency, along with recovering domestic demand across multiple markets in sync with the long run demographic benefit that sits within emerging markets, leads me to be reasonably sanguine in my outlook.”
