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Emerging Markets on the Road to Recovery: Top-Performing Funds and Economic Trends

Emerging markets are expected to experience a significant recovery in the second half of 2021 and continue into 2022, according to James Donald, head of the emerging markets platform at Lazard Asset Management. This optimistic outlook is supported by various economic indicators and the performance of top-performing equity funds in the Emerging Markets category.

One of the key drivers of this recovery is the increase in companies' investment expenditures in developed countries. In the US, for instance, companies' investment expenditures could rise by 8 percent compared to 2020. This trend is likely to benefit countries like Colombia, Argentina, and India, which could see an influx of investment from developed economies.

Companies in emerging markets that benefit from higher commodity prices and offer goods rather than services could also see a positive impact from the strengthening of global investment expenditures. Most emerging markets are commodity exporters, so their economic recovery depends on the development of commodity prices.

Rising inflation is generally considered a sign of strong economic growth and good for stocks from emerging markets. However, if inflation reaches a level that threatens global growth, it would be a clear disadvantage for the asset class, warns Donald. In the US, the core inflation rate reached its highest level since 1992, at 3.8%. Producer prices in emerging markets have risen significantly, although the impact on consumer prices has been uneven so far.

The top-performing equity funds in the Emerging Markets category for the second half of 2021 into 2022 are not explicitly listed with precise performance rankings for that exact timeframe. However, based on available data and common knowledge of funds in this sector, some notable emerging markets equity funds with strong performance or recognized positioning around this period include:

• Eaton Vance Emerging and Frontier Countries Equity Fund, which showed significant gains with a focus on emerging and frontier markets, though it experienced volatility with sharp negative returns in some quarters within 2021-2022.
• Baillie Gifford Emerging Markets Equities Fund, a long-term growth-focused fund with diversified holdings in key emerging economies like China, India, Brazil, and South Korea.
• WisdomTree Emerging Markets ETFs, especially their India-focused funds like the WisdomTree India Earnings ETF (EPI), are highlighted for strong performance through this period due to India's robust economic growth and market leadership among emerging markets.
• FTGF Martin Currie Global Emerging Markets Fund and DWS Emerging Markets Equity S Fund (SEMGX) are other key players mentioned, though specific performance data for H2 2021 into 2022 is limited in these sources.

In general, India-focused funds and those overweight in growth-oriented emerging markets stocks tended to outperform during this timeframe, while funds more concentrated on China or frontier markets faced headwinds in parts of 2021 and 2022.

It's important to note that for precise top performance rankings and exact returns in H2 2021 and into 2022, specialist fund rating sites like Morningstar or Lipper as of that period, or fund fact sheets issued then, would be required. The provided sources focus primarily on more recent holdings and outlooks rather than historical half-year performance ranking.

The recovery in emerging markets is not without challenges. India is currently experiencing a second wave of the pandemic that has overwhelmed its healthcare system. Latin America, one of the three major frontier regions, has paid the highest human and economic toll to the Corona virus. Parts of Latin America are still heavily affected by the pandemic.

The presidential elections next year in Brazil are likely to be hotly contested. The outcome of these elections could have significant implications for the Brazilian economy, as the largest Latin American economy has returned to its pre-crisis level.

In conclusion, the emerging markets are on the road to recovery, driven by various economic factors and the performance of top-performing equity funds. However, challenges such as the ongoing pandemic, inflation, and political uncertainties remain. Investors should carefully consider these factors when making investment decisions in the emerging markets.

The recovery of emerging markets is intrinsically linked to the performance of top-performing equity funds, such as the Eaton Vance Emerging and Frontier Countries Equity Fund, Baillie Gifford Emerging Markets Equities Fund, WisdomTree Emerging Markets ETFs, FTGF Martin Currie Global Emerging Markets Fund, and DWS Emerging Markets Equity S Fund. Other general-news factors, like the presidential elections in Brazil, can also impact the economic future of these markets. The ongoing challenges, like the pandemic in India and Latin America, rising inflation, and political uncertainties should be carefully considered by investors when making decisions in emerging markets. Other politics playing a role in the future of these markets could include the outcome of the upcoming presidential elections in Brazil.

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