Ninety One

Investors should keep a close eye on the new Cold War brewing between China and the US, but its outcome could still support “robust” trade and investment as strategic competition drives capital investment.

A second Trump presidency and the potential for a new US trade regime increases uncertainty as we head into 2025. But despite the prevailing zeitgeist of unease, emerging market investors have various reasons to be sanguine, according to Ninety One

Capturing structural growth potential is not easy, but in uncertain markets, it’s essential, according to Ninety One. Investors are eager to explore the opportunities in artificial intelligence, and exposure to higher quality companies can successfully position them for an AI-driven future.

Beyond the stocks everybody thinks will be the winners, there’s a better (and cheaper) way to get exposure to some of the biggest themes driving markets, according to Ninety One.

China’s reduced dominance in the emerging markets has changed the composition of the index, providing greater choice and diversity for investors as supply chains relocate and Asia becomes the world’s AI factory.

There’s a massive global shortfall in capital to finance the energy transition, and a significant chunk is still being spent in the developed world. But the battle for net zero will be “won or lost” in the emerging market corporate sector.

To get the most benefit from the transition to net zero it’s worth asset owners considering the natural advantages they have and the areas where they’re best placed to provide capital.

There’s been good times and bad times for the EM set, but they’ve exited Covid monetary settings well ahead of their developed market peers and their debt is back en vogue.

The EM story of economic growth and portfolio diversification should work in theory – but what’s worked in practice has been altogether different. Still, gloom around China obscures the many bright spots in a diverse market.

The peak in interest rates and inflation has been supportive of markets, but there’s still plenty of turbulence ahead and investors should be wary of chasing stocks higher.