A Positive Start to the Second Half of 2018 for Emerging MarketsJul 31, 2018

Punti chiave

Three Things We’re Thinking About Today

  1. The left-wing coalition headed by Andrés Manuel López Obrador (AMLO) won by a landslide in Mexico’s general election. We do not expect a radical change in terms of Mexico’s fiscal or central bank policy as a result of AMLO’s win. Overall, we continue to have a positive outlook for the country. High consumer confidence, combined with a gradual disinflation process, a healthy labor market and credit availability, should help support private consumption this year. If the new administration can deliver on its promises and still preserve solid economic fundamentals, we could see healthy growth in Mexico this year and in 2019.
  2. The recent market correction across emerging markets has made valuations even more attractive, helping us find interesting opportunities related to secular technological trends. Growth in the e-commerce sector, for example, continues to accelerate, gaining an increasing share of the retail market in countries such as China and India. We believe the long-term growth of ecommerce companies hinges on their ability to scale and increase their market penetration. More importantly, these companies are using innovation to their advantage to disrupt traditional business models in other industries such as transportation and health care to pursue new revenue streams.
  3. We believe China’s deleveraging process has been more orderly than may appear at first glance. The fact that regulators allow banks to report non-performing loans reflects their confidence in the system’s ability to bear those losses. We remain positive on China’s overall growth trajectory. Some observers estimate that the trade war and other issues could shave up to 100 basis points off China’s gross domestic product (GDP) growth, but this is not much considering that growth is still expected to exceed 6%. We continue to favor companies that stand to benefit from structural trends like e-commerce, growing affluence and premiumization.