"The developed world is moving closer to the emerging markets" as geopolitical risks are much more tangible and have become more frequent, says Vera German, co-manager of the emerging market value strategy at Schroders.
German cites the outlook for the ongoing US/China tensions, following the outcome of the US elections later this year, as an example.
She says: “Of course, the American system has checks and balances, and whoever becomes president will not be able to rule [in the way leaders of autocratic counties do].
“At the same time, you do still have, for example, the power of decree [executive orders in the US] and you can change the context in which the country operates significantly, depending on who is in charge.”
With China accounting for 30 to 40 per cent of the emerging market universe and most of the demand for Chinese products coming from outside the country, ongoing tensions between the east and west are having a big impact on stock prices.
German adds: [When it comes to the issue of electric vehicles], we're currently seeing the EU say they're clearly subsidising their EVs, [so they say] 'we're trying to build our own homegrown industry'.”
“Those kinds of conflicts and disagreements will just become more frequent in the future. Investors ignore geopolitics at their own risk.”
In this video, German explains how the value approach to emerging markets works, discusses how risk is managed, and describes the outlook for emerging markets.
This video is worth 30 minutes of CPD.
