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EM Stocks in the Time of Trade Tantrums
By Advisor Perspectives
Trade war’s becoming a bigger source of concern amongst investors, particularly in emerging markets, because a lot of those economies are very trade dependent. But there’s a difference between the first-order effects, the categories that are actually under trade restriction or trade tariffs now, and what might be happening in future.
China exports 2 trillion dollars’ worth of goods every year. So putting tariffs on 50 billion of goods going into the US is just a drop in the ocean. But what’s concerning investors is where it goes from here. How much bigger could the impact be? There are clearly some parts of the markets that are going to be affected by this—export companies, for example, that are directly impacted by the tariffs. But it’s important to note that a lot of emerging markets these days are not directly trade related—for example, the consumer sector. Look at China, the most reliable, consistent part of China’s GDP growth is consumption. And as investors, we can find lots of interesting opportunities in the consumer area that are much less related to what’s going on with any potential trade war.
Read more at Advisor Perspectives.
Photo: Allan Ajifo