Emerging market (EM) equities have begun 2022 on a weak footing but a turnaround is expected in 2022 owing to strong policy support from China coupled with rising commodity prices. In China, infrastructure capital expenditure has emerged as a national policy focus, marking a potential inflexion point for China’s infrastructure downturn. Beijing has decided to put challenging economic reforms such as slowing debt growth and curbing income inequality on hold in 2022 as it focuses on growth ahead of a Communist Party Congress this autumn.
Higher global trading volumes alongside higher terms of trade continue to dominate the EM landscape. The stronger US dollar has weighed on EM equity performance. However, in previous rate tightening cycles by the Federal Reserve back in 2004-2006 and 2016-2017, EM stocks and bonds saw some of their best gains. EM central banks have been proactive compared to developed market (DM) central banks in their monetary stance and appear to have a better handle on inflation compared to DM central banks.
In this webinar, IBKR will be joined by WisdomTree to discuss the following topics in greater detail:
- Accommodative monetary policy by China to lend support to EM
- Higher terms of trade alongside higher commodity prices to benefit EM commodity exporters
- Over the long term, we expect the twin deficit in the US to weigh on the US dollar which should favor EM equities
- EM equities are attractively valued in comparison DM equities
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