Woori BMO Group Says Emerging Market Cycle Shows That Quality Wins Over Long-Term
TORONTO, ON / ACCESSWIRE / January 6, 2021 / Woori BMO Group has today said that for long-term traders in developing markets, the latest period of the world economic recession is reminiscent of the past. It is not their first go-around when it comes to coping with crippled economies that are emerging from a recession.
The Asian financial crisis of 1997, caused by a currency collapse in Thailand seemed to signal the conclusion of the region’s prosperity. With contagion still ongoing, the Russian debt crisis exploded and appeared to be declaring the turmoil of a failed state. In 1997, the index of emerging markets plummeted by almost 57%. But it was restored by February 2005.
“Value stocks underachieved growth firms by about 27% in the 36 months leading up to March 2000, when uncertainty was on the rise. The scales then balanced out decisively. The value increased 65% between March 2000 and December 2008,” said Director of EMEA Wealth Management at Woori BMO Group, Christian Harper.
Many of the major developing markets were in the financial downturn of 2008 with current accounts and foreign-exchange reserves in surpluses and dollar liabilities well suited to dollar savings than in the past. There were significant anomalies, but it was clear that the new world had evolved.
China, in tandem with the world’s central banks, has generated enough interest to revive international markets and the economy. In the following years, systemic reforms in many developing markets - from economic liberalization in China to digitalization around the board - have demonstrated that the “emerging” label is out of date.
In both the developing economies and the S&P 500, intellectual property has become a recent commodity of value. Companies with those assets exceed any that have survived in the past. Energy and materials firms in the MSCI Emerging Markets Index have now fallen from 37% to less than 10% since the financial crisis. The technology industry actually has more than 30 percent of the same index weighting in developing markets as its S&P 500 counterpart.
“There are strong reasons to invest now, particularly on a cyclical basis. Economic activity indexes such as the indicators of buy managers are improving, the possibility of trade wars with the US has diminished, and exports and the tourism industry could rebound as vaccines are spread. The Asian Free Trade Area is on the horizon, drawing on the Regional Comprehensive Economic Partnership,” said Andrew Williams, Director of Institutional Equity at Woori BMO Group.
Slower macroeconomic inflation would ensure that a premium for quality growth is preserved. In the short term, there will be an increased focus on value. However, for long-term investors, quality will win out.
About Woori BMO Group
Founded in 2007, Woori BMO Group is a full-service wealth management company providing both corporate institutions and private clients a tailored financial advisory service from its retail office in Toronto, Canada.
Company: Woori BMO Group
Contact: Mr. Shinsato Masao, Chief Economist
Address: 25F Exchange Tower, 130 King Street West, Toronto, ON, Canada M5X 1E3
SOURCE: Woori BMO Group
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