Emerging Markets Offer Growth at a Discount; Cyclical Opportunities Seen in Brazil, Structural Advantages for India
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Emerging markets (EM) offer growth potential at discounted valuations, with cyclical opportunities in Brazil and structural opportunities in India. Keys to EM outperformance include a weaker dollar and higher earnings growth compared to developed markets.
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China faces optimism and risks - stimulus measures may boost consumption, but external demand and the property sector remain concerns. Valuations look attractive amid the negativity.
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U.S. dollar weakness historically benefits EM equities. Drivers may include peaking Fed hikes, a wider fiscal deficit, and diminished confidence in U.S. institutions.
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India should see elevated growth given favorable demographics, government spending, and foreign investment. Upcoming 2024 elections could spur additional stimulus.
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Brazil is well positioned cyclically thanks to falling inflation and interest rates which may unlock pent-up demand. Valuations are undemanding even if earnings growth stalls.