Volatility has swept through global equity markets this year, prompting some asset managers to suggest it’s time to reconsider investments in emerging markets. These developing economies faced significant challenges following U.S. President Donald Trump’s announcement of “reciprocal tariffs” in April, with countries like Sri Lanka, Cambodia, and Vietnam facing tariffs of 44%, 49%, and 46%, respectively. As the July 8 deadline for implementing new tariffs approaches, many institutional investors remain skeptical that these soaring rates will be sustained. According to Bank of America’s latest Global Fund Manager Survey, which involved 222 managers overseeing assets worth $587 billion, investors are increasingly shifting their focus to emerging markets, marking the highest allocation to these equities since August 2023. Notably, the survey revealed that 28% of respondents held a net overweight position in emerging market stocks, a significant increase from 11% the previous month.
The report further noted that most investors (77%) expect the final U.S. tariff rate on imports to be below 82%, while only 1% anticipate rates exceeding 30%. On average, analysts forecast a U.S. tariff rate around 13%. Investment banks are also looking towards emerging markets; Goldman Sachs recently launched its Emerging Markets Green and Social Bond Active ETF, which targets corporate and sovereign fixed income securities intended for eco-friendly and socially responsible projects.
Archie Hart, co-portfolio manager at asset management company Ninety One, highlighted the “EM-ification” of developed markets, suggesting that emerging economies could become attractive as investors navigate unpredictable market conditions. He noted that economic policy in emerging markets has generally been prudent, with many countries acting preemptively against inflation and maintaining manageable deficits compared to developed counterparts. “Recent volatile trade policies have shaken confidence in institutions and policymaking in developed markets, making emerging markets, which previously languished in low valuations, an appealing alternative,” Hart explained.
In light of these shifts, Bank of America has recommended increased exposure to Uzbekistan’s sovereign debt. The nation, buoyed by rising gold prices, is making strides in energy tariff reform, enhancing fiscal stability and reducing reliance on sovereign borrowing. Research from JP Morgan echoes this sentiment, suggesting that investors should consider Uzbekistan over Dubai’s real estate bonds for better yields.
Meanwhile, Greg Luken of Luken Wealth Management pointed out the favorable demographics of emerging markets, which are often overlooked in asset allocations. He emphasized the value these markets present, particularly in countries like India, Brazil, and China, which hold significant upside potential. The case for investing in the Global South is being championed by banks such as Deutsche Bank, which has identified more than 130 countries-including India, South Africa, and Vietnam-as ripe for investment. These nations are projected to host 70% of the world’s workforce by 2040 and contribute 20% to global GDP.
Luken concluded, “While it’s uncertain whether this marks a new phase in emerging market investment, it’s crucial we act on the opportunities available today.” With the current complexities and changing landscapes, emerging markets could provide the strategic advantages investors seek in a period of instability.
Original Source: https://www.cnbc.com/2025/06/19/emerging-markets-where-investors-invest-money-mexico-brazil-india-china-vietnam-indonesia.html
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Publish Date: 2025-06-19 05:01:00
