The winners in emerging markets

Investors can no longer treat the emerging market world as a single entity because there are huge divergences within this group, both with respect to their growth prospects and their policy risks. Without the need to be a specialist on all the markets, investors can still gain a lot of outperformance – and avoid underperformance – by splitting the EM world into two. Economies which are net importers of commodities are the standout winners as the Commodity Supercycle unwinds. Of course, the corollary is that commodity exporters face massive headwinds as their terms of trade deteriorate, their currencies weaken, their inflation picks up and monetary policy tightens.

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