This month, I will be passing on my thoughts on investing in Emerging Markets in the Trumpian world.
Introductory Remarks
Most readers will know that the classification by the UK Investment Association of the Emerging Markets sector results in it incorporating funds that have very significant overlaps with funds in the Asia Pacific Ex-Japan sector, which I wrote a little about a couple of weeks back.
In reality, there are funds named for Emerging Markets that are full of shares in companies from regions that are now fully emerged (like South Korea) and are in fact well know global businesses on a par with similar firms in the USA and Europe, companies like TSCM, Samsung and Hyundai, not to mention the Chinese internet and retail operators like Alibaba and Tencent.
This is one aspect any research needs to take into account. Finding true ‘discovery’ or ‘frontier’ funds or even investing at all in smaller developing counties as was really possible 30 years ago, is much harder if you want to use OEICS/funds. ETFs may offer more focused choices, but as ever, will more likely be index tracking and that brings some disadvantages, amplified when the target markets are volatile. This article does not extend to ETF commentary.
Another hazard that would have been unimaginable even a few years ago is the level of political risk, most obviously in the form of (on/off) tariffs, which may be unexpectedly announced in an overnight post on Truth Social (maybe then TACO’d), and also a real risk of military actions, not necessarily in emerging market regions (although Venezuela arguably is) but which would impact global trade in unexpected ways, spook markets and so on. If markets are selling off, as a general rule emerging markets are going to be selling off more sharply, simply due to liquidity limitations.
By now, you may be thinking: ‘given the above, why bother?’ I think that would be a fair question.
However, in 2025, to my personal surprise, Emerging Markets was one of the best performing regions in US Dollar terms. In fact, the well understood and possibly ongoing depreciation of the greenback is one of the tailwinds for developing counties, because many will have US Dolar denominated debts that are now rather cheaper to service from local currency or with other currencies earned from exports.
Furthermore, the AI capex boom and European defence spending will both generate manufacturing demand for components of not only the electronic variety, and the cost of producing those components will be cheaper outside of the developed world, so there could well be a second wave of demand for stocks in companies not so large as the Nvidias and TSMCs of this world. Of course, even the companies of the Mag 7 will be manufacturing or sub-contracting to emerging nation workforces.
So maybe this an asset segment at least worthy of some attention.
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