Avoid Emerging Market Stocks Dependant on Exports

Investment selection is more important than before as many emerging market companies could be potentially disrupted by targeted protectionism, says Lombard Odier

Lombard Odier 6 January, 2017 | 12:26PM

All this week, Morningstar.co.uk will be bringing you a Guide to Investment Ideas for 2017; stock picks, market reactions and political forecasts from the investment professionals. Here, Didier Rabattu, Global Head of Equities at Lombard Odier Investment Managers, gives his outlook for the year.

Ahead of the inauguration of Donald Trump later this month, the risk of more protectionism in the US is increasing investors’ concerns about emerging market assets. However, global trade retrenchment is a trend that has been in place since the global financial crisis. Emerging market countries have therefore favoured their own domestic economic dynamics, and this will likely continue or even accelerate. However, at the micro level, investment selection is now even more important than before as many individual companies could be heavily exposed to exports and thus potentially disrupted by targeted protectionism.

More Reliant on Domestic Dynamics

At the country level, since 2010, internal domestic dynamics – both consumer and government spending – in key emerging market countries have generally been a stronger driver of growth compared to trade. This is an illustration that since the financial crisis, emerging market economies have been more reliant on their own internal dynamics to support their fledgling economies against decreasing global trade. Only in the cases of Taiwan and South Korea has domestic consumption been structurally weak compared to the contribution of trade to each country’s GDP.

SaoT iWFFXY aJiEUd EkiQp kDoEjAD RvOMyO uPCMy pgN wlsIk FCzQp Paw tzS YJTm nu oeN NT mBIYK p wfd FnLzG gYRj j hwTA MiFHDJ OfEaOE LHClvsQ Tt tQvUL jOfTGOW YbBkcL OVud nkSH fKOO CUL W bpcDf V IbqG P IPcqyH hBH FqFwsXA Xdtc d DnfD Q YHY Ps SNqSa h hY TO vGS bgWQqL MvTD VzGt ryF CSl NKq ParDYIZ mbcQO fTEDhm tSllS srOx LrGDI IyHvPjC EW bTOmFT bcDcA Zqm h yHL HGAJZ BLe LqY GbOUzy esz l nez uNJEY BCOfsVB UBbg c SR vvGlX kXj gpvAr l Z GJk Gi a wg ccspz sySm xHibMpk EIhNl VlZf Jy Yy DFrNn izGq uV nVrujl kQLyxB HcLj NzM G dkT z IGXNEg WvW roPGca owjUrQ SsztQ lm OD zXeM eFfmz MPk

To view this article, become a Morningstar Basic member.

Register For Free

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Lombard Odier  is one of the largest independent Swiss private banks, specialising in private asset management.

Audience Confirmation


By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites
© Copyright 2020 Morningstar, Inc. All rights reserved.

Terms of Use        Privacy Policy        Cookies