Anglo-South African asset manager Ninety One discusses tailwinds across emerging market equities, local debt and private credit, as developed markets confront rising debt, stubborn inflation and political uncertainty. Meanwhile, emerging markets have outperformed their developed peers this year.

At a media event in London last week, Jaspal Bopari, co-head of UK institutional at Ninety One, discussed positive developments in emerging markets highlighting that investors were increasing their interest this year. “Emerging markets are back on investors’ radars,” he said.

“Emerging market debt has performed well over the past five years compared to developed markets and is at an all-time high,” Bopari said. “The outperformance is down to the fundamentals of emerging markets, with low debt and fast GDP growth. Emerging market debt is forecast to be 60 per cent lower than developed markets in 2025 while emerging market bond yields are 70 per cent higher than developed markets."

"Emerging market growth is also twice as high,” Grant Webster, co-head of emerging market sovereign debt and currencies, continued.  “The dollar has weakened which is good for emerging markets and valuations are attractive.”

Meanwhile, Alan Siow, co-head of emerging market corporate debt, said it has been a strong year for emerging market corporate credit, outperforming US investment grade credit and high yield: “Emerging markets ex-China are on track for record levels of issuance.” 

However, private markets have not yet been a big deal in emerging markets while they have been attractive in the US, Matt Christ, portfolio manager, emerging market transition debt, said. But companies are trying to mobilise capital in faster-growing emerging markets for the energy transition. “The transition has accelerated, driven by economics. Clean energy is replacing previous energy forms. Solar energy is cheap compared to fossil fuels and Brazil has cheaper renewable energy contracts than [it would have with] fossil fuels,” he said.

China also now leads globally in solar, batteries, and electric vehicles. While China still relies on fossil fuels, it produces more than 80 per cent of all solar photovoltaic panels, half of the world’s leading electric vehicles and a third of its wind power. 

Varum Laijawalla, co-portfolio manager of emerging market equities, said emerging market equities are up 35 per cent this year, compared with 20 per cent for developed markets, with artificial intelligence driving returns across markets. “Asia’s dominance in the semiconductor supply chain is powering AI,” Laijawalla said. “The dollar has also weakened which benefits emerging market equities.” The firm predicts that total returns in sterling for equities will reach 1.9 per cent in the US, 4.2 per cent in Europe ex-UK, 4.5 per cent in the UK and 5.2 per cent in emerging markets. 

A number of wealth managers have come out recently in favour of emerging markets and Asia this year, for instance Aberdeen Investments, Paris-based Amundi, Carmignac and Indosuez, as well as GIB Asset Management and Franklin Templeton. See more here and here.