The reaction across emerging markets to the news that Donald Trump has won the US presidential election has not been as “negative as feared”, according to Ninety One.
Despite a stronger dollar and higher treasury yields, high-yield credit markets have largely performed well given expectations of stronger risk markets, while sovereign debt markets such as Ukraine are rallying on the expedited peace negotiations under a Trump administration, the investment manager said.
While China and Mexico displayed some weakness due to concerns over potentially higher tariffs, markets that might benefit from a shift in supply chains such as India and Malaysia have strengthened.
Thys Louw, emerging market fixed income portfolio manager at Ninety One, said: “Several key events over the next few days could help shape the short-term outlook for emerging markets in the face of trade and tariff uncertainty, namely the Chinese National People’s Congress meeting, which will give guidance on the size of Chinese fiscal support; the November US Federal Reserve meeting; and finally, a 30 year treasury auction, which will be important in providing an anchor for longer dated treasury rate.”
Archie Hart, emerging markets equity portfolio manager at Ninety One, added: “Longer term emerging market performance will remain dependent on the complex interaction between economic growth, currencies, interest rates and geopolitics with much of this being anchored on longer term economic trends.
“The American President is a very powerful figure, but we suspect the laws of economics may prove even more powerful in the long run. In the medium-term market performance will be driven by policy implementation and execution, much of which is still to be determined.”
