Institutional
This site is intended for Institutional or Qualified Investors only – not for public audience.
This is not intended for distribution to any person or entity who is a citizen or resident of any locality, state, country or other jurisdiction where such distribution, publication, or use would be contrary to law or regulation.
Information contained on this website is based upon sources believed to be reliable, but no representation or warranty is given as to the accuracy or completeness of those sources. Any opinion, estimate or forecast may be changed at any time without prior warning. Investors should read the prospectus or offering memorandum before investing in any Pictet managed funds. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Past performance is not a guide to future performance. The value of investments and the income from them can fall as well as rise and is not guaranteed. You may not get back the amount originally invested.
Sub-Advised NOT FDIC INSURED ‖ MAY LOSE VALUE ‖ NO BANK GUARANTEE
The information contained in the website is intended for U.S residents only.
The information contained on this website does not constitute investment advice or a recommendation to purchase or sell any securities or other financial instrument or any particular strategy or fund. Market commentary, product information and related performance data available on this website has been compiled from sources believed to be reliable and is provided in good faith for informational purposes only. The content on this website is intended for institutional investors and their financial representatives only, and should not be relied upon by or distributed to retail investors or members of the general public in any jurisdiction.
Investments involve risks, are not guaranteed and may not return the original principal amount invested. Past performance is no guarantee of future results. Investors should read all available product information carefully before making an investment decision, including information about applicable risks, fees and expenses.
Of all regions, Latin America is the most promising.
Written by
Patrick Zweifel, Chief Economist
Share this article
After the excesses of the holiday period, this month's EM Monitor looks at what’s in store for emerging markets on the growth and inflation front.
ANOTHER GOOD YEAR LIKELY FOR EM ASSETS
We see three key drivers underpinning growth across emerging markets in 2018.
Fig.1. Key drivers of global growth likely to support EM growth
Source: Pictet Asset Management, January 2018.
Changing gears
What trends will be at play?
First, we should continue to see growth accelerate for commodity exporters, with real GDP growth reaching 3.0 per cent in 2018 vs. 2.1 per cent in 2017. Meanwhile, EM manufacturers should see lower growth, as China’s growth rate cools.
Fig.2. Real GDP growth change: 2018 forecasts less 2017 estimates (%Y/Y)
Source: Pictet Asset Management, CEIC, Datastream, December 2017
The return of Latin America…
The second and most noticeable trend will be the recovery in Latin America, where we expect to see the strongest bounce (see Fig.2. above).
Brazil, its largest economy, should see the biggest rebound in growth (from 0.6 per cent in 2017 to 2.6 per cent), as it emerges from a severe recession. Meanwhile Peru, Chile, Colombia, Mexico and Argentina should all record higher real GDP growth.
Growth momentum appears less strong in EMEA. Real growth is expected to drop to 2.9 per cent in 2018, from 3.4 per cent in 2017, with Turkey the laggard.
Asia ex-Japan’s prospects are somewhere in between. India’s growth should rise from 6.3 per cent to 7.5 per cent, but inflation is also rising (see next section). Other markets in the region however are likely to see flat or slowing growth profiles. In particular, China’s growth is seen slowing from 6.8 per cent to 6.6 per cent.
The other side of the coin: inflation
We expect overall EM inflation to increase to 3.5 per cent, from 3.3 per cent in 2017. There will be a marked divergence between manufacturers, who will see inflationary pressures, and commodity exporters where inflation should decline to 5.9 per cent, from 7.2 per cent.
Fig.3. Inflation change: 2018 forecasts less 2017 estimates (%Y/Y)
Source: Pictet Asset Management, CEIC, Datastream, December 2017
At the country level, India is where we expect inflation to rise the most (from 3.5 per cent to 5.3 per cent). This somewhat tempers our optimism around the country's real growth prospects (Fig.2).
On the other hand, Argentina is where we see the strongest drop in inflation, admittedly from very high levels of 24 per cent in 2017 to 18 per cent in 2018.
Our growth and inflation forecasts by region
Fig.4. Latin America: top of the class
Source: Pictet Asset Management, CEIC, Datastream, December 2017. * 2017 data are estimates. ** 2018 data are forecasts.
Fig.5. Asia: Steady progress
Source: Pictet Asset Management, CEIC, Datastream, December 2017. * 2017 data are estimates. ** 2018 data are forecasts.
Fig.6. EMEA: Slowing momentum
Source: Pictet Asset Management, CEIC, Datastream, December 2017. * 2017 data are estimates. ** 2018 data are forecasts.
THE VIEW FROM OUR EM EQUITY TEAM
By Klaus Bockstaller, Head of Global Emerging Markets (Value)
Emerging equities in 2018 - value or growth?
Value stocks have lagged growth stocks in emerging markets for the past five years, but this might be about to reverse.
History shows that EM value stocks tend to outperform when EM real growth exceeds that of the developed world. This is shown in Fig.7. below, where the differential in performance between value and growth stocks (grey line) closely follows the real growth rates differential between the emerging and the developed world (green line). However the recovery in the green GDP line last year has not yet been matched by a recovery in EM value stocks.
Fig.7. EM value vs. EM growth, real GDP growth in EM vs. DM
Source: Pictet Asset Management, CEIC, Datastream, December 2017
Two factors could be at play. One is that investors possibly remain sceptical around the prospects for EM GDP growth. The other is that the strength of investor belief in tech stocks is still driving EM growth valuations.
We think this might be about to change, as the outlook for EM GDP growth is strong and improving, as already discussed above. This comes at a time when valuations of EM growth stocks look ever more stretched.
Investors in emerging markets should take a closer look at value stocks.
MARKET WATCH
Key market data
31/12/2017
Source: Datastream, Bloomberg, data as at 31/12/2017 and in USD. Equity indices are quoted on a net dividend reinvested basis; bond and commodity indices are quoted on a total return basis. The currency rates evolution is treated as a performance calculation based on FX rates.
Read more about emerging markets and market outlook
Patrick Zweifel joined Pictet in 1997. He is Chief Economist at Pictet Asset Management. Before assuming his current position in 2009, he was head of the “Macro Research Team” at Pictet Private Wealth Management. In particular, he had economic research responsibility for emerging markets and Japan, and for the development of quantitative models on major asset classes, primarily foreign exchange models. Before joining Pictet he was a research assistant in econometrics and monetary theory and worked on international research projects for the World Bank and the European Union. He holds a PhD in econometrics from the University of Lausanne.
About
Anjeza Kadilli
About
Anjeza Kadilli
Anjeza Kadilli joined Pictet in 2015. She is an Senior Economist in Pictet Asset Management’s Economic Analysis team where she conducts macroeconomic analysis of emerging markets. Anjeza holds a PhD in Econometrics from the University of Geneva - where she also obtained an MSc and BSc in Economics. During her PhD, Anjeza spent time at the University of Southern California, Riksbank and HEC Montreal as a visiting scholar.
About
Nikolay Markov
About
Nikolay Markov
Nikolay Markov joined Pictet Asset Management in 2013 as an Economist in the Fixed Income department.
Before joining Pictet, he was working in the Monetary Policy Analysis Unit of the Swiss National Bank where he performed research on monetary policy rules for Switzerland. Prior to working at the Swiss National Bank he was a teaching and research assistant at the University of Geneva and participated in international academic conferences.
Nikolay holds a PhD in Economics from the University of Geneva and obtained a PhD program certificate from the Swiss National Bank doctoral institute in Gerzensee.
About
Klaus Bockstaller
About
Klaus Bockstaller
Now well into his third decade as a value investor in emerging equities, the breadth and depth of Klaus Bockstaller’s market experience are an invaluable asset to the Emerging Equities team. Klaus has steered the Global Emerging Markets Value strategy since he joined Pictet Asset Management in 2009. He is the lead portfolio manager for the strategy, working with portfolio managers John Moorhead and Hugo Bain. Klaus holds a Master's degree in Economics (Diplom Volkswirt) from the University of Freiburg.
Share this article
Important legal information
This marketing document is issued by Pictet Asset Management. It is neither directed to, nor intended for distribution or use by any person or entity who is a citizen or resident of, or domiciled or located in, any locality, state, country or jurisdiction where such distribution, publication, availability or use would be contrary to law or regulation. Only the latest version of the fund’s prospectus, the KIID (Key Investor Information Document), regulations, annual and semi-annual reports may be relied upon as the basis for investment decisions. These documents are available on assetmanagement.pictet.
This document is used for informational purposes only and does not constitute, on Pictet Asset Management part, an offer to buy or sell solicitation or investment advice. It has been established on the basis of data, projections, forecasts, anticipations and hypothesis which are subjective. Its analysis and conclusions are the expression of an opinion, based on available data at a specific date. The effective evolution of the economic variables and values of the financial markets could be significantly different from the indications communicated in this document.
Information, opinions and estimates contained in this document reflect a judgment at the original date of publication and are subject to change without notice. Pictet Asset Management has not taken any steps to ensure that the securities referred to in this document are suitable for any particular investor and this document is not to be relied upon in substitution for the exercise of independent judgment. Tax treatment depends on the individual circumstances of each investor and may be subject to change in the future. Before making any investment decision, investors are recommended to ascertain if this investment is suitable for them in light of their financial knowledge and experience, investment goals and financial situation, or to obtain specific advice from an industry professional.
The value and income of any of the securities or financial instruments mentioned in this document may fall as well as rise and, as a consequence, investors may receive back less than originally invested. Risk factors are listed in the fund’s prospectus and are not intended to be reproduced in full in this document.
Past performance is not a guarantee or a reliable indicator of future performance. Performance data does not include the commissions and fees charged at the time of subscribing for or redeeming shares. This marketing material is not intended to be a substitute for the fund’s full documentation or for any information which investors should obtain from their financial intermediaries acting in relation to their investment in the fund or funds mentioned in this document.
EU countries: the relevant entity is Pictet Asset Management (Europe) S.A., 15, avenue J. F. Kennedy, L-1855 Luxembourg
Switzerland: the relevant entity is Pictet Asset Management SA , 60 Route des Acacias – 1211 Geneva 73
Hong Kong: this material has not been reviewed by the Securities and Futures Commission or any other regulatory authority. The issuer of this material is Pictet Asset Management (Hong Kong) Limited.
Singapore: this material is issued by Pictet Asset Management (Singapore) Pte Ltd. This material is intended only for institutional and accredited investors and it has not been reviewed by the Monetary Authority of Singapore.
For Australian investors, Pictet Asset Management Limited (ARBN 121 228 957) is exempt from the requirement to hold an Australian financial services license, under the Corporations Act 2001.
For US investors, Shares sold in the United States or to US Persons will only be sold in private placements to accredited investors pursuant to exemptions from SEC registration under the Section 4(2) and Regulation D private placement exemptions under the 1933 Act and qualified clients as defined under the 1940 Act. The Shares of the Pictet funds have not been registered under the 1933 Act and may not, except in transactions which do not violate United States securities laws, be directly or indirectly offered or sold in the United States or to any US Person. The Management Fund Companies of the Pictet Group will not be registered under the 1940 Act.
Pictet Asset Management Inc. (Pictet AM Inc) is responsible for effecting solicitation in North America to promote the portfolio management services of Pictet Asset Management Limited (Pictet AM Ltd) and Pictet Asset Management SA (Pictet AM SA).
In Canada Pictet AM Inc. is registered as Portfolio Manager authorised to conduct marketing activities on behalf of Pictet AM Ltd and Pictet AM SA. In the USA, Pictet AM Inc. is registered as an SEC Investment Adviser and its activities are conducted in full compliance with the SEC rules applicable to the marketing of affiliate entities as prescribed in the Adviser Act of 1940 ref. 17CFR275.206(4)-3.
This website uses cookies to enhance user navigation and to collect statistical data. To refuse the use of cookies, change your settings or for more information, please click on the following link: Cookies policy. By continuing to browse this website, you accept the use of cookies for the above purposes.
