Global View May 2015: What Every Emerging Market Investor Needs to Know - It's Time To Raise EM Exposure

by Michael J. Howell2. June 2015 16:28

Emerging Market (EM) investing has fallen out of fashion after several years of underperformance (50% down against World stocks since late-2010). There are two broad reasons for this slump. First and most important, the policy mix in EM has been far less favourable than the QE-driven backdrop that supported the Developed Markets and, particularly, Wall Street. Since a large part of the EM liquidity squeeze arose in China over the 2011-2014 period, the dominant position of China's economy also gave this spill-over an added economic dimension. Second, Developed Market corporations have faced up more quickly to competitive pressures and cost control than their EM counterparts, so helping them sustain high profit margins and generate more cash flow growth.


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