Emerging assets fell in the face of a stronger U.S. dollar and renewed lockdowns in China. Uncertainty over China’s economy, which is grappling with slowing private investment, property-sector debt and regulatory crackdowns, also weighed on broader emerging markets. This comes at a time when more emerging central banks – such as Korea and South Africa – have started raising interest rates.
Emerging markets are facing a number of challenges near-term, but all are not insurmountable. Given the year-to-date correction and the overall negative sentiment in the market, we believe that EM offers one of the best risk-reward opportunities at the moment as valuations were driven below the long-term trends; these levels offer patient investors an opportune compensation for the risk undertaken.