Talking Point  

Emerging market shares could struggle

Emerging market shares could struggle

Events in China and the continued uncertainty around the progress of vaccinations in other emerging markets may mean those shares struggle for a considerable period of time, according to Simon Edelsten, who runs the £313m Artemis Global Select fund.

The shares of many Chinese companies listed on developed market stock exchanges, as well as those listed in China, have fallen sharply in recent weeks as the government of that country has begun to intervene in the operations of companies in a number of sectors.  

Edelsten says: “We reduced our exposure to China a few months ago as we were concerned about a rising regulatory tide and reduced pickings for shareholders. We did not expect the sharp sell off after the decision last Friday to stop education companies making profits but this is a continuation of measures restraining capitalism which started well before the high profile cancellation of the Alipay IPO last autumn.”

Many emerging market economies are considerably behind many developed markets in terms of vaccination roll-outs, which hinder the ability of those markets to perform. 

Edelsten says: “As China is the largest portion of emerging market indices this may dampen investor enthusiasm for some time especially as Covid continues to be hard to control and investors can opt for recovering developed markets.”