Emerging markets: What we learned from one of the biggest election years ever

At the end of a year in which almost half the world’s population were eligible to vote, investors can finally look forward to more certainty, says Pendal’s ADA CHAN

• End of a huge election year improves certainty for investors
• Potential opportunity emerges in China
• Find out more about Pendal Global Emerging Markets Opportunities Fund
• Watch a Pendal webinar covering the outlook for global equities and emerging markets

IF IT feels like a hectic year for emerging markets investors, you’d be right.

So far 66 national elections have taken place around the world in 2024, according to the International Institute for Democracy and Electoral Assistance, an intergovernmental organisation that supports democracy worldwide.

And another eight or so are still scheduled before the new year.

Just after the US election, Pendal Global Emerging Markets Opportunities fund manager Ada Chan joined Pendal Global Select fund manager Chris Lees in a live webinar to discuss major trends emerging from these polls, along with other issues.

You can watch the full webinar here. 

Below are Ada Chan’s key points. Click here for insights from Chris Lees.

A big year for elections

Investors in emerging markets (EM) can expect more certainty after a huge year in national elections, says Pendal emerging markets fund manager Ada Chan.

“We will have to wait and see the details on many Trump Administration policies … and implementation is key from the US.”

But there are already actionable lessons to be drawn from elections in Indonesia, Mexico and India — which all had “very different elections this year”, Chan says.

“In Indonesia, there is continuity and stability and that is viewed positively. It is a market where reforms are [working] and driving the economy. That’s a differentiator among ASEAN markets.”

James Syme, Paul Wimborne and Ada Chan (right) are co-managers of Pendal Global Emerging Market Opportunities Fund

“In Mexico investors expected Claudia Sheinbaum to win, but the surprise was her super majority. There was also an overlap with her predecessor … and that created uncertainty and investors don’t like uncertainty.

“Mexico is a difficult market – which part of a valuation is driven by a carry trade unwinding, which part is driven by local politics and which part is driven by anticipation of what Donald Trump is going to do. We think a lot of the bad news is already in valuations,” she says.

“In India, people expected Narendra Modi to win, and he did. But markets in India are pricing in perfection. In India it isn’t so much about the election as high valuations.”

China

Investors in China should focus on domestic industries, rather than manufacturing exporters, Chan says, ahead of any Trump Administration decision on tariffs.

“The Chinese government wants to stimulate its economy. But I think there is a little bit of wait and see, to make sure they know what Trump is proposing,” Chan says.

“It is a timing issue for China. They want a bit more clarity [on the Trump Administration] before they come up with their stimulus. We do expect there will be more stimulus, but it is a step-by-step process.”

Chinese consumers are changing as well. Previously foreign brands sold better than local products but that is no longer the case.

“Chinese consumers are embracing domestic brands. They can buy better products, with higher average prices, that are a lot cheaper than foreign brands,” Chan says.

Country-first analysis

Chan’s investment process starts with identifying a promising country, based on an outlook and valuation perspective.

Find out about

Pendal Global Emerging Markets Opportunities Fund

Read more

“There are opportunities emerging  in China. We think people had become too pessimistic and gone too extreme when looking at China.

“We saw Chinese companies report better numbers, raise forward earnings [guidance] and then get sold off.

“There is the opportunity to [invest] in companies that are becoming stronger because management are focusing on what makes the business more efficient, in an environment which is very difficult.”

About Pendal Global Emerging Markets Opportunities Fund

James Syme, Paul Wimborne and Ada Chan are co-managers of Pendal’s Global Emerging Markets Opportunities Fund.

The fund’s top-down allocation process is based on analysis of a country’s economic growth, monetary policy, market liquidity, currency, governance/politics and equity market valuation.

James, Paul and Ada are senior fund managers at UK-based J O Hambro, which is part of Perpetual Group.
 
Pendal is a global investment management business focused on delivering superior investment returns for our clients through active management.

Contact a Pendal key account manager here