So, yes, once again, emerging market equities have been pretty weak this year. But actually, when you look at the different countries, we had very strong returns from countries in Latin America and in the Middle East, driven by strong commodity prices.

But once again, what has really driven the poor performance of emerging market equities was China, for several reasons. One of them is a continued dispute with the U.S. regarding some of the large companies that are listed in the U.S.

Second reason is the pursuit of the Zero-COVID policy, which is an—it was our fear, really, at the beginning of the year. And we start to see more and more lockdowns in bigger and bigger cities.

And right now, Shanghai, the largest city in the country, is in lockdown, which probably is going to last for a few weeks. So this is definitely going to lead to a decrease in expectations for economic growth, which in turn, has led to a poor performance of the equity market.

But now, going forward, we still feel like, in China, either COVID would be under control in the coming months, or the government will have to give up on the Zero-COVID policy. And either way, the government will have to stimulate the economy. And usually, it’s a really good trigger for good performance of the equity market.

So that’s what we expect. We expect better performance from China going forward, which, with a very large rate in the EM Index, should lead, really, to better performance for the rest of the year. But we may see a few more difficult months before it gets better.

Yes, it did. But I would say the main reason it did was because the connection with the increase in commodity prices, I would say. That would be, really, the main reason.

So what we had is, really—I mean, we’ve seen the oil price spiking up, commodity prices getting even stronger. This, in turn, is leading to, obviously, higher inflation. And this is leading, again, to central banks globally having to increase rates much faster and in a bigger way than it was expected only a few months ago.

So that has led us to really review the way we want to position our portfolios. Because we feel like the probability of a potential recession in the U.S. and in some other countries and in Europe has definitely increased. It’s difficult to know if it’s going to happen, when it’s going to happen. But I think our view is getting a little bit more cautious because of that.

Yeah, you’re right. I mean, clearly, emerging market equities’ performance has been disappointing over the past, I would say, 9, 10 years. I would not say that, actually, EM equities have been that weak. Actually, they’ve done okay. But, if you compare with North American equities, for instance, they’ve been really lagging.

So, yes, in that respect, it’s been disappointing when we, obviously, always present as emerging market as giving you higher return—higher risk, but higher return—because there’s just more growth in emerging market countries.

And that’s really been the issue the past few years is, what you have seen, you have seen economic growth artificially sustained in some of the developed countries, especially in the U.S., where, really, especially during the presidency of Mr. Trump, really tried everything he could to support the economy, which in turn, really helped the stock market to perform very strongly; probably too strongly, when you consider it.

And at the same time, emerging market countries really faced several headwinds in quite a few countries, whether it’s political or reforms that need to be implemented and hurt growth. So it was not easy years.

It hasn’t changed, really, our outlook for the future. We still think that emerging markets is really a place where you want to be invested, that the economic growth will be superior, if we have like a medium-long-term view. There are a lot of different exciting countries you can invest in, with a lot of companies that are growing really fast, catering to the needs of this emerging huge population in emerging markets.

So if anything, right now is not a bad timing. Usually, it’s when everyone gives up that is a good entry point. So really, we haven’t changed our view.

And as I said, we had a lot of reforms being implemented over the past few years. I’m thinking, for instance, countries such as South Africa or India. And we’re going to see the benefit of those in the coming years.

Yeah. So, China is a very big country, first. It’s the biggest country by far in emerging markets. And I know a lot of people more recently have questioned the fact, is China really investable. There seems to be more and more interference from the government.

The reality that the interference was always there. I mean, it’s a centralized economy. It’s just that there was this new big sector, like, internet stocks, e-commerce stocks, e-gaming. It used to be very small a few years ago and the government didn’t see really the need to interfere that much. And they were seen as a very positive way because they were creating jobs, they were creating value. But they became so big that, actually, like any other sector in the Chinese economy, they are now being more closely regulated, I would say.

So, for us, it was not—I think the surprise was more the speed in which they intervene, but, really, the direction is not surprising. So, we always looked at China the same way, which is at really looking at aligning ourself with the government, because the government really can make and break sectors. And if you don’t invest or behave the way the government wants you to do, it’s going to be tricky to perform, really.

So it hasn’t really changed the way we invest in the country. I would say what has been a little bit different is, we’ve been having access more recently to the mainland China segment of companies, which is much bigger in terms of number of companies, and quite different. Instead of having exposure to those big, large-cap, mainly regulated companies in the financial sector, energy, telecom, et cetera, it’s more on the industrials, health care, so more innovating companies. So, that’s a really interesting segment.

So, I would say we like investing in China. You have to be extremely careful the way you do it. And really, you have to analyze the implications of an exposure to certain segments and how the government can interfere potentially. But there are also a lot of opportunities in that market.

Yes. So, as I said, I guess we’re getting a little bit more defensive at the moment. I think the big global cyclicals may be a little bit at risk, if we start to see the fear of a potential recession in the coming quarters. So I think that’s really an area we want to be careful.

I think where we see some interesting opportunities is still in the financial sector. In emerging markets, it’s a slightly different perspective than in developed markets. There’s a lot of growth in emerging markets in the financial sector. There’s under-penetration of financial services, whether it’s banking or insurance. So those segments are really areas of growth.

They suffered, actually, even in emerging markets, for quite a while from low interest rates, because we had also low interest rates in emerging markets for a while. Then obviously, COVID was also pretty difficult for the sector.

But now that we’re out of COVID, we start to see an increase in interest rates, we see a rebound in loan growth, and the valuation is still really attractive in many countries. So, that’s a sector we really like, and we see opportunities.

In terms of countries, we feel like, as I said, China could be an opportunity in terms of valuation. Valuations are quite attractive in China. As I said, you have to be selective, but there are really some interesting areas, with the government pushing, for instance, the carbonization effort. So we like the green infrastructure names. I know they’ve been quite volatile, but I think there’s still quite a lot more to go on that segment. And as I said, manufacturing of high-value-added products made in China is also an area which is really interesting.