EM key themes

Equity themes for 2024

Opportunities in infrastructure, software and services that use generative AI for automation and transformation. Prefer AI deployers (e.g. fintech, consumer and healthcare firms) with potential upside.

Benefit of AI earnings for European semi-conductor names has been limited so far. Favour IT service companies (such as Consultants) who are well-positioned to assist with AI preparatory work on data/IT infrastructure.

Opportunities in South Korea (i.e. dominance in memory boosts its lead in chips) and Taiwan (i.e. foundries will gain from chip demand). EM-domiciled firms invested in the US can benefit from the IRA.

Opportunities in GLP-1 medicines that are approved for diabetes but aid weight loss in treating obesity. Favour GLP-1 losers with attractive valuations while remain cautious on leaders with growth priced in.

Opportunity in a certain large European pharmaceutical company involved in GLP-1 medicines but has already seen strong performance.

EMERGING MARKETS

EM Growth Premium

Easier Monetary Policies

Asia in Focus

Risks to watch

In a weaker global economic outlook, EM look more resilient, but with higher fragmentation and divergences across countries. The EM-DM growth differential should remain wide in 2024, at its highest level in five years.

Disinflation is ongoing across EM. Some central banks have started easing their monetary policies and there is still room for rate cuts, but the battle with inflation will continue in an era characterised by a disorderly energy transition and global realignments.

In the global reordering, Asia may be the winner in terms of investment flows. India’s economic prospects remain bright. Deleveraging and a structural shift will continue in China, with GDP slowing to the 3/3.5% target in 2025.

‘Higher-for-longer’ in US rates, geopolitical risks and significant elections in 2024 are key risks to watch. Investors should also monitor the idiosyncratic stories and internal vulnerabilities that can exacerbate EM fragmentation.

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Source: Amundi as of November 2023. DM: developed markets. EM: emerging markets. CB: central banks.

Equity themes for 2024

Opportunity in a certain large European pharmaceutical company involved in GLP-1 medicines but has already seen strong performance.

EMERGING MARKETS

EM Growth Premium

Easier Monetary Policies

Asia in Focus

Risks to watch

In a weaker global economic environment, EM look more resilient, but with higher fragmentation and divergences among countries. EM-DM growth differential to stay wide in 2024, at its highest level in five years.

Some EM Central Banks have already started their policy easing and there is still room to cut rates. Moreover, the expected accommodative policy by the Fed is supportive for the EM space. But the inflation battle is not won yet.

In the great reallocation, Asia may be the winner for investment flows. India’s economic prospects remain bright. In China, the structural shift and deleveraging will go ahead, with GDP growth slowing to around 3% in 2025.

The key risks to watch are the geopolitical risk and significant elections in 2024 (the biggest election year in history). Investors also need to monitor idiosyncratic stories and internal vulnerabilities which could increase EM fragmentation.

Learn more

Source: Amundi as of January 2024. DM: developed markets. EM: emerging markets. CB: central banks.