Emerging markets have continued to lag so far in 2023. But economists at UBS now see a much more favorable backdrop for emerging markets.
Emerging markets well-positioned to be early beneficiaries of the three inflection points
“Emerging markets are closely linked to the fortunes of the Chinese economy, which should rebound as the country opens up.”
“Easing financial conditions and a weaker US Dollar have historically been linked with strong emerging market performance.”
“Valuations are appealing on a relative basis and corporate fundamentals are turning the corner.”
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Recent news of a UBS report on a resurgence of emerging markets has led to much discussion in financial circles. UBS strategists have identified that a ‘promising alignment of stars’ for emerging markets is currently in place.
The report suggests that multiple factors, from supporting government policies to favourable industry trends, are combining to create positive outcomes for emerging markets.
UBS strategists explain that the marked improvement in emerging markets is being driven by a range of factors. These include improved macroeconomic conditions, expanding access to finance, rising purchasing power of domestic consumers, and greater investment in production resources.
In addition, supportive government policies are helping to fuel expansion. This includes government interventions such as infrastructure projects and opening up specific sectors to foreign investments.
The report also forecasts favourable industry trends that will continue to benefit emerging markets. These include rising demand for technology goods and services, rapid innovation and technological advancements, and booming ecommerce marketplaces.
UBS analysts stress that although some risks remain, the overall picture remains largely optimistic. They add that further strengthening of financial conditions is expected in the near future, and that this will open new opportunities for emerging markets.
Overall, it appears that the future of emerging markets is looking more promising than ever. As the UBS report suggests, ‘the stars are aligning’ for promising economic outcomes in emerging markets. It remains to be seen where this newfound resurgence will take us.
