After emerging market stocks led global equity markets lower in a brutal 2018, some U.S.-based fund managers are betting that the asset class may have the largest rebound in the new year
It may not look likely at the moment, given that an economic downturn in China prompted iPhone-maker Apple Incorporated to lower its quarterly revenue forecast on Wednesday for the first time in a decade.
Its shares slumped nearly 10 percent after Chief Executive Tim Cook blamed the U.S.-China trade war and “economic deceleration,” prompting broad selloffs around the world the following day.
Yet fund managers from Westwood Holdings Group, GMO, T. Rowe Price and Causeway Capital Management are among those who are betting that emerging market stocks will post outsized gains in 2019. They cite a combination of compelling valuations and a likely decline in the value of the dollar that will help accelerate economic growth.
As China continues to bear the brunt of U.S. President Donald Trump’s focus on trade tariffs, fund managers are expecting that shares in countries like India, Thailand, Peru, and Brazil will outperform the China-dominated emerging market benchmark index.
“We want to lean into the fear in the markets,” Reuters quoted Sebastien Page, head of asset allocation at T. Rowe Price to have said.
He expects emerging markets will outperform in the year ahead as the Federal Reserve curtails its pace of interest rate hikes and the dollar subsides.