Laurence Bensafi, Portfolio Manager, Deputy Head of Emerging Market Equities, RBC Global Asset Management (UK) Limited, shares her thoughts on 2024 and the year ahead.
Quite a few countries performed well this year. Technology stocks in Taiwan did well due to the AI theme. India also continues to perform strongly, and although the election result was surprising, the result was taken quite positively in the end and the stock market reached new highs. China has had a surprise comeback since the end of September; stimulus was announced and it was taken positively by investors.
There are still many uncertainties regarding the timing of more rate cuts in the US, the dollar trajectory, and whether a soft landing or a more recessionary environment will occur. Despite the challenging environment, emerging market equities have performed quite strongly.
This year is one of the most difficult in terms of an outlook. The election of Trump is going to create a lot of uncertainties for the asset class. He has discussed high tariffs for all countries that are trading with the US, and in particular, he wants to implement a high tariff of 60% to China.
This potential tariff would have a big impact and could halve economic growth for the country in the coming years. It would also impact many other EM countries that neighbor China in Southeast Asia. Latin America, and particularly Mexico, would also be impacted by trade tariffs.
Even though the environment is challenging, much is priced in, and we believe there will be negotiations between the US and several countries. With regard to China, we’re hoping for a resolution next year, as we’ve seen in the past. China can also continue to stimulate its economy and improve consumption patterns, and that should help to generate higher growth.
Watch time: 3 minutes, 55 seconds
View transcript
2025 Market View – Emerging Markets Equities
Laurence Bensafi, Managing Director and Portfolio Manager, Deputy Head of Emerging Market Equities, RBC Global Asset Management (UK) Limited
Laurence: We had a pretty good year for emerging market equities in 2024 so far. Quite a few countries had a good performance, a strong performance. For instance, Taiwan did well. Technology stocks in the country did well on the back of, again, a strong performance from AI stocks. India, continues to perform strongly even after the elections where we had a bit of a surprise there, but which were, in the end, taken quite positively and the stock market reached new highs there.
We had China that had a surprise comeback since the end of September when finally some kind of stimulus was announced and that was again taken very positively by investors. In a pretty difficult global environment, I would say, where there are still a lot of uncertainties regarding the timing of more rate cuts in the US, the US dollar trajectory, and in general, if we're going to have a soft landing or a more recessionary environment going forward, in that tough environment, emerging market equities performed quite strongly, I would say.
It's tricky. I would say this year is probably one of the toughest years where we are to give an outlook for the asset class going forward. The big news happened only recently and it was the election of Donald Trump in the US and that is going to create a lot of uncertainties for asset class. Obviously, President-elect Trump has talked about really high tariffs for all countries that are trading with the US, and in particular, he wants to implement a really high tariff of 60% to China.
But that would have a big impact on China itself. If nothing else changes, it could halve the economic growth for China in the coming years. That will have also an impact on many other emerging market countries neighboring China, so Southeast Asia, but also in other countries that are going to be impacted by higher, probably, interest rates for longer in the US. For instance, Latin American countries will be impacted.
Having said that, in a difficult environment, we see also a lot of value in emerging market equities because we've seen already a sell-off in the equity, we've seen already some weaknesses in the currencies, and emerging market equities already trade at the biggest discount to develop markets ever. A lot is priced in and there will be negotiation between the US and several countries. China, for instance, we've seen in the past that the two countries can agree on some kind of trade agreement, and we're hoping for some kind of resolution as well next year. China can also continue to stimulate its economy, its potential really to improve the consumption patterns, that should also help to generate higher growth.
When it comes to other countries, for instance, Mexico, that is quite impacted as well by this result of the elections, well, again, there's a lot of negotiation that can happen between the new presidents in both countries, actually. So even though the environment seems quite tricky going forward, a lot of it is priced in, and I think there'll be a lot of discussion, a lot of negotiation. That's what President-elect Trump is known for, and things can turn out actually a lot more positive than they look like at the moment.