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INVESTMENT STRATEGY QUARTERLY

The Emerging Market World in 2022

Chris Bailey, European Strategist, Raymond James Investment Services Ltd*

This was a challenging year for the whole world, but extra competition via breaking up dominant companies, as seen
judging by the full year equity market losses in Latin in a number of sectors in the developed world over the last cen-
America, China, and (outside of India, the UAE and Saudi tury. No wonder stock markets in China and Hong Kong were
Arabia) many other emerging market indices, even negative performers across full year 2021.
recovering global economic growth numbers did not
provide assistance. By contrast equity markets in the
United States, the United Kingdom and Europe pro- Growing emerging market economic power is an
duced good gains. Little wonder that global emerging inevitable part of the 2020s.
market indices – with nearly half the index focused on
China – fell to a relative low against the sector diversi- However, growing emerging market economic power is an inev-
fied S&P 500 Index not seen since late 2002. itable part of the 2020s. The initial rise – and further rise – of the
consumer economy has been a dominant part of developed
COMPARING MARKET PERFORMANCE market growth over the past 30 years, as reflected by personal
debt levels across countries in North America and Europe. From
Underperformance can happen for many reasons, not all of a trade perspective, there is a reason why the American presi-
which are immediately obvious. The largest four emerging dent has spoken to the Chinese president three times over the
market economies of China, Taiwan, South Korea, and India col- last year. Whilst plenty of potential strategic challenges could be
lectively account for just over three-quarters of global emerging apparent during the 2020s, there is already too much in current
market indices. Economic growth numbers in these names have trade flows to ever stop the leaders talking.
collectively remained strong, with the economies in both China
and Taiwan generating a positive GDP number for full year 2020, EMERGING MARKET OPPORTUNITIES
despite the COVID-19 challenges. And whilst populations are
aging in all economies around the world, the scope for rising Emerging markets fundamentally have two opportunities and
consumer expenditure and technological application have been two choices. Beyond the rise of consumer spending, all
notable drivers over recent years. emerging markets retain a material internal development
opportunity.
Of course any economic evolution take time. And that is espe-
cially true in China with its all-powerful Chinese Communist Whilst every country in the world can see day-to-day life posi-
Party. Whilst the country’s former leader Deng Xiaoping once tively evolved by better education, healthcare, and business
noted that “to get rich is glorious,” the last 18 months has seen efficiency, the scope for positive change and impacts is most
the country’s current leader Xi Jinping focused on the rise of the proportionately apparent in the emerging market nations. This
importance of ‘common prosperity,’ which has caused crack- has always been the case, as shown by the material improve-
downs on many important consumer, technology, and property ments of the South Korean and Taiwanese economies over the
sector companies in a manner materially different from forcing last 50 years, countries which today should probably be
*An affiliate of Raymond James & Associates, Inc., and Raymond James Financial Services, Inc.

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