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EM Outlook Encouraging

After a year of turbulent economies and stock markets, Rob Brewis, investment manager at

Aubrey Capital Management, feels the outlook for emerging markets (EMs) in 2023 is looking far more encouraging, particularly for countries such as China, India, Mexico, Vietnam, and Brazil. “A year ago, we dared to suggest that a lot of the bad news in China was in the price and some of the business regulation headwinds were alleviating. We did not, however, foresee the draconian zero COVID policy which sucked the life out of the Chinese economy, reaching a climax expressed in civil disorder not seen since 1989. So far, the result of these protests has, thankfully, been very different this time,” he says. However, the firm invests in the Chinese consumer and believes they will be spending the massive savings hoarded up in the past few years. Despite India’s strength in 2021, it proved very resilient this year too. The spike in oil came and went and India survived. “Like much of the emerging world, inflation picked up a little, but much less dramatically than the developed world and now looks to have peaked,” says Brewis. Further on inflation, most emerging markets did not have near zero inflation, nor zero rates going into this period. “So, while inflation and subsequently interest rates have risen, the magnitude of these rises has been much less dramatic than in the U.S. and Europe. For many ‒ with India, Mexico, and Vietnam the best examples ‒ inflation has been on a long and downward trend, which may have been temporarily interrupted, but the downtrend remains largely intact. Long term structural downtrends in inflation are usually good for equities,” he says.


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