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The Emerging Markets Investment Process

Investing during a time of structural change in Emerging Markets

Over the last 10 years, the emerging markets investable universe has significantly changed. EM bond markets have mushroomed in size, local currency denominated bonds have taken on far more importance and China A-shares have expanded the opportunity set. How should investors approach the EM investment process, given the transformations taking place? What are the forces driving future structural change? How can investors predict the countries and companies that have long-term growth potential? The publications below consider all of these questions.

Other papers examine the Chinese economy, including China's so-called "debt problem" and the ongoing US-China trade impasse.

shanghai chinese economy


Emerging Markets Debt


EM Bonds—Standing on Their Own Two Feet (Franklin Templeton, Jun 2019)

For compliance reasons, this paper is only accessible in the EMEA region

This short paper from Franklin Templeton demonstrates that the performance of EM bonds is becoming less correlated with US interest rates and the US economy. The issuance of local currency debt now exceeds that of hard currency debt, and investors are advised to blend a mixture of the two in order to improve the resilience of their portfolios.

Avoiding “diversification decay” in emerging-markets debt (Eaton Vance, Jun 2019)

For compliance reasons, this paper is NOT accessible in the United States and Canada

Eaton Vance examines the value of EM bonds as portfolio diversifiers. They argue that investors should include "off-benchmark" bond markets in their portfolio allocations, as these smaller markets are less exposed to developed market factors, enabling investors to benefit more fully from the uniquely diversifying fundamentals and characteristics of emerging markets.

Asia's US Dollar Bond Market: A New Asset Class (Invesco, Jun 2019)

Invesco analysts argue that the Asian U.S. dollar bond market presents attractive opportunities, with ample liquidity, improved credit risk and favourable relative valuations.


The Chinese Economy and Markets


China's Debt Problem (Matthews Asia, Mar 2019)

For compliance reasons, this paper is only accessible in certain geographies

Matthews Asia examines the build up, scale and composition of China’s debt problem. The author discusses the debt cleanup program that is already underway, and explores the implications for the Chinese economy.

China's Sci-Tech Board: Hope Or Hype? (Franklin Templeton, 2019)

For compliance reasons, this paper is only accessible in the EMEA region

What will the new Nasdaq-Style tech exchange mean for investors? Is this an opportunity that investors should be jumping on?

Banning Huawei: an act of economic war (Hermes IM, Jun 2019)

For compliance reasons, this paper is NOT accessible in the United States

The blacklisting of Huawei by the Trump administration has put the company's future at risk, effectively cutting it off from its US suppliers. Is this decision a security essential, a negotiating tactic, or an act of economic war? What are the long-term geopolitical implications and what does it mean for other Chinese stocks?

China's Great Wall of Worry: Myths vs. Realities (AB, 2019)

For compliance reasons, this paper is only accessible in North America and South America

In this 15-page document, analysts and economists from AB seek to dismantle several "myths" surrounding the Chinese market and identify the factors that investors should focus on, in order to take full advantage of the opportunities that exist.

Video: Hard Landing for China’s Growth? Six Factors to Watch (AB, Jun 2019)

For compliance reasons, this paper is only accessible in North America and South America

With economists divided on whether China will suffer a hard landing, AB suggests six factors that investors should be looking out for.

Podcast: An Investor's Guide to China - Opening Up (Fidelity Intl, Jun 2019)

For compliance reasons, this paper is only accessible in the UK & Europe

This new, 30 minute podcast, aims to take the listener into a deep dive of Chinese economy and markets. Paras Anand, Fidelity's Asia Pacific Head of Asset Management, interviews a selection of China experts.

US-China: Intrigue and Trade (Mellon Capital, Jun 2019)

In an article published in mid-June, Vincent Reinhart examines the current state of play in China-US trade policy.


Structural Change in Emerging Markets


Investing in the Changing Shape of Emerging Markets (Amundi AM, Jun 2019)

For compliance reasons, this paper is NOT accessible in the United States

Over the last 10 years, the emerging markets investable universe has significantly changed. EM bond markets have mushroomed in size, local currency denominated bonds have taken on far more importance and China A-shares have expanded the opportunity set. How should investors approach the EM investment process in this transforming world? Amundi discusses the concept of differentiating between EM countries using the concept of "fragile" and "anti-fragile" economies.

Structural change in emerging markets: 4 key forces (Wellington Management)

Analysts at Wellington Management examine the factors driving secular change in the Emerging Markets and consider how these forces can be aligned with profitable investment themes. The key, they argue, is to focus on the long-term.

Forces shaping the investment landscape (UBS AM, Jun 2019)

This UBS mid-year report examines the global economic and TAA outlook and considers the arguments for making a stand-alone allocation of China.


EM Equities and the Investment Process


A Multidisciplinary Approach to Emerging Market Equity (MFS, 2019)

What does a "multidisciplinary approach" to investing in EM equities look like. This 7-page report by MFS Investment Management provides the answers.

The future of EMs: A marathon not a sprint (Wellington, Jun 2019)

This research paper argues that what matters in emerging markets over the long-term is "economic staying power". But how do investors discern which countries are the economic stayers? The authors urge a focus on the quality and durability of economic development, rather than a simple focus on the short-term growth numbers.

ESG Integration in Asia Pacific: Markets, Practices, and Data (CFA Institute)

The polling firm YouGov was commissioned by CFA Institute to survey ESG integration and investment practices around the world. This report features the results in the Asia Pacific region.

Exchange Rate Predictability in Emerging Markets (Amundi AM)

For compliance reasons, this paper is NOT accessible in the United States

This working paper from Amundi Asset Management identifies the most important variables for predicting Latin American exchange rates. The research uses financial and macroeconomic variables to predict currency returns over a 15 year period ending early 2016.

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