Text on screen: Pramol Dhawan, Head of Emerging Markets Portfolio Management
Recorded 16 August 2022
Well many things have changed or in fact evolved across emerging markets. Firstly, the growth in terms of the quantum of debt. EM debt indices has nearly doubled over the past decade. There’s more countries and more variety in terms of the types of risk that you can take.
Over the past decade, issuers have built up reserves, they’ve improved the flexibility of their balance sheets, they’ve enhanced central bank independence, and they’ve liberalized their current accounts, all whilst institutionalizing counter cyclical fiscal rules.
This in its totality has helped the emerging market asset class to mature, but it doesn’t mean it’s immune from external shocks. In fact, emerging markets continues to be highly sensitive to both the Federal Reserve interest rate cycle, as well as the Chinese growth cycle.
One of the most stark enhancements has been the change of investor perceptions towards emerging markets.
Investors have really changed the way that they view the asset class from what was deemed a more tactical investment decision towards thinking about EM structurally as a part of their portfolio and strategic asset allocation decisions.
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