Emerging Markets: A success story

Looking at the depots, the emerging markets appear particularly pleasing. Despite the weak dollar and the worrisome Korean conflict, the fast-growing economies in Asia and Latin America have left the stock exchanges in the more developed economies behind. For a broad diversification in the portfolio, it is worthwhile not only to look at stocks, but also bonds more closely.

In the last few years emerging market stocks have often been underappreciated. However, the first signs of a comeback were already apparent in 2016, when the stock markets of the most important emerging markets were able to catch up with the strong development of the US markets. The importance of adding these exotic markets to our portfolios was particularly evident in the last two quarters. As early as the beginning of the year, emerging market stocks rose more than twice as much as US equities. Currently, Chinese and Brazilian equities in particular are performing very well.

Given the long-term unchanged conditions such as the favorable demographic development, rising income and consumption, or double the economic growth compared to the industrialized countries, there is only one question for investors: why right now?

From our point of view, the political efforts in the emerging markets play an important role. Countries such as India and Brazil have prompted long overdue reforms and, with their more business-friendly policies, have lured investors from abroad. Moreover, the company valuations, which are still attractive in comparison to the large economic nations, have also fueled the development.

In addition, there is the stable development of inflation in selected countries, which have also made emerging market bonds interesting again. In the current low-interest environment, we believe that emerging market bonds are a real alternative. But: Every emerging economy offers their own opportunities and risks. Of course, we are happy to help you choose suitable funds for your portfolio.