Tech-savvy consumers in economies that have reopened and are in post-COVID-19 recovery – including China, Taiwan and South Korea – are fuelling a revival of emerging market equities, according to American Century senior portfolio manager Patricia Ribeiro.
“Young, fast-growing populations are about to become middle-class consumers. COVID-19 has spawned a genuine stay-at-home culture, whether it be remote learning, virtual medical visits, working and shopping from home. And there’s a huge opportunity for investors to capitalise on this structural shift,” Ms Ribeiro said.
“Emerging market economies represent 80 percent of the world’s population, making younger, connected consumers key to domestic demand. Investment inflows are now starting to reflect this trend,” she said.
China’s rapid response to the pandemic, which originated in the city of Wuhan, means that domestic activity has also rapidly returned to normal, putting it ahead of other emerging and non-emerging economies in the region.
“From an equity perspective, that’s leading to increased production, manufacturing and consumption – and earnings growth has recovered in response. The prospect of a recovery in emerging market equities is quite compelling, particularly in an economy like China’s,” Ms Ribeiro said.
The second quarter of 2020 was also one of the best-performing quarters for emerging market equities in more than a decade, with the MSCI Emerging Markets Index up another 10 per cent in the third quarter at October 2020.
“We believe this momentum is set to continue as investor sentiment improves. When combined with extraordinary fiscal and monetary stimulus from global central banks in response to COVID, global liquidity could potentially sustain – if not lift – emerging market equities even further,” Ms Ribeiro said.
