• “The main theme is an accelerating credit growth almost everywhere in the emerging world, so that both consumption and investments are on the rise after years of contraction.”
Maarten-Jan Bakkum is Senior Strategist in the Macro & Strategy team within the Multi-Asset Boutique of NN Investment Partners

“2018 will probably have an uncertain start, given the nervousness in the IT sector – technology stocks now account for 30% of the MSCI Emerging Markets index – and increased concerns about the US interest rate policy. These are mainly short-term problems. Ultimately, it is all about the growth prospects for the longer term, which are good.

In blue: KraneShares CSI China Internet ETF; in red: iShares MSCI Emerging Markets ETF; in green: S&P 500 Index (all in USD).

Also, the Fed will continue to raise interest rates, but probably not by much more than is already priced in. This would mean that the positive trend of emerging equity markets will continue. World trade growth is very strong right now, and is showing no signs of weakness. This is always a significant support for emerging markets. At the same time, the accelerating credit growth means that consumption and investment growth are picking up in most emerging markets as well. This had not happened since 2011.

NN (L) Emerging Markets Equity Opportunities – P Cap EUR

    NN IP Emerging Markets Equity Opportunities Fund - EURThe fund invests in companies that are established, listed, traded or having substantial business interests in emerging markets worldwide. The investment approach is high conviction stock picking based on deep, fundamental, independent research. Portfolio construction is designed to achieve diversification and deliver absolute returns over the cycle with low volatility. The Fund may also invest directly, up to 20% of its net assets, in mainland China via Stock Connect which is the mutual market access programme through which investors can deal in selected securities. Measured over a period of three to five years, the fund aims to beat the performance of the benchmark MSCI Emerging Markets (Net).

For now, the main risks no longer seem to be related to the US interest rate policy or the Chinese financial sector. This was the case in the years before 2016. Investors in emerging markets should now pay particular attention to the elections in Mexico (July) and Brazil (October), the directional struggle in South African politics and the first signs of stress in the overheated economy of Turkey. For these four countries, the coming year will be exciting and probably decisive for a longer period. The biggest challenge for 2018 is navigating the risks and opportunities in these countries.”


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