COVID-19, the new coronavirus, first appeared in the world's largest emerging market, China, where it has caused significant economic damage.1
Since then, of course, it has spread worldwide. However, while much of the media focus has been on its spread in the developed world, it is now causing major challenges in a number of emerging markets, most notably Iran, and there is growing speculation that the problem is worse than reported across Southeast Asia. A recent report rom Harvard University suggests numbers are being underreported.2
In this context, investors might be tempted to flee emerging markets altogether, especially since mechanisms for governments to gather information, inform populations, manage healthcare demands and control migration flows are much less developed in many emerging markets than in wealthier developed markets. Are investors selling off?
“We have been buying into the recent correction, albeit quite tentatively, particularly into Brazil where we have initiated two new positions," said Anthony Linehan of Somerset Capital, which manages the St. James's Place Global Emerging Markets fund.
"Interestingly, in spite of China being the epicentre of the COVID-19 outbreak, the Chinese market has been relatively strong in the recent correction, so we are waiting for a better opportunity to add to positions here. The market volatility does provide opportunity for longer term investors and we continue to have confidence in both our strategy and holdings,” said Linehan.
Somerset Capital is a fund manager for St. James's Place.
The value of an investment with St. James's Place will be directly linked to the performance of the funds you select and the value can therefore go down as well as up. You may get back less than you invested.
The opinions expressed are those of the fund managers listed above and are subject to market or economic changes. This material is not a recommendation, or intended to be relied upon as a forecast, research or advice. The views are not necessarily shared by other investment managers or St. James's Place Wealth Management.
1 An ex-IMF official estimates the virus's cost to the Chinese economy in January alone at $196 billion (Source: https://www.scmp.com/economy/china-economy/article/3051909/covid-19-likely-slash-us185-billion-chinas-economy-january )
2 Source: https://www.medrxiv.org/content/10.1101/2020.02.04.20020495v1.full.pdf
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