EM is exciting to invest in, right now!
The volatility of emerging markets to date has made some investors wary of the asset class. Find out why we think it's an exciting place to invest right now.
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There are various reasons why we believe that emerging markets is the right place to invest now. If you see the volatility of emerging markets over the last 10-15 years, the major sources of that volatility have always been that emerging markets were either more expensive, so they were more volatile or emerging market countries' balance sheets were more fragile. The import cover of their forex was low. They were running current account deficits. And at a time when U.S. rates were going up or the dollar was appreciating, there was always a big impact on emerging markets. But what we see now is a slightly different situation. I believe emerging market economies are better and more resilient, and we can clearly see that current account deficits are narrower than what we have seen versus history. Even in terms of inflation and interest rates, Emerging markets are already carrying lower inflation and higher real rates. And in terms of valuation, if you look at emerging markets, we are today talking about emerging markets trading at a discount of 30% versus developed markets and versus their own history. So if you look at the balance sheet of governments; if you look at the balance sheet of companies; if you look at valuations; if you look at interest rates. I believe today is a reasonable starting point for emerging market investment for the next 5-10 years.
23 February 2023
Amit Goel
Lead-Portfolio Manager, Fidelity Global Emerging Markets Strategy and Portfolio Manager, Fidelity India Fund
