Emerging markets: Resilient cycle shift – HSBC

HSBC Asset Management highlights that Emerging Markets have weathered higher Oil prices and a stronger Dollar better than in past cycles, thanks to stronger policy frameworks and diverse country exposures. The report notes improved real yields, firmer fiscal positions and anchored inflation expectations, arguing EM assets now function as a higher-quality, diversified building block in global portfolios.

EM assets show structural resilience

"Emerging markets (EM) have proved remarkably resilient to the twin shocks of surging oil prices and a stronger US dollar – a combination that was once a recipe for widespread stress."

"Compared to the pre-Global Financial Crisis era, EM economies absorb stress much better today. Capital outflows are muted, currency weakness translates into less inflation, and the overall hit to growth is generally smaller."

"Meanwhile, real yields in many emerging markets remain attractive versus developed markets and fiscal positions have generally strengthened. Together with improving central bank credibility, this is helping to anchor inflation expectations when external conditions become choppy."

"Divergence between countries is a big part of the story. Commodity exporters like Brazil and Colombia have benefitted from higher oil prices."

"India is a big energy importer, but also benefits from a very strong structural growth story over the long term."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor.)