Emerging Markets Equity Commentary | Q3 2020

Quarterly Letter

Emerging market assets rallied strongly to pre-COVID-19 levels, driven by the recovery in economic activity in most Asian economies and extremely accommodative global monetary conditions.  The equity market recovery was led by North Asian mega-cap technology stocks, which benefited from strong near-term demand trends.  Emerging market currencies were notable for their wide disparity of performance.  Strength in North Asian currencies was offset by weakness in Latin American and Eastern European currencies, where the paths of economic recovery remain unclear.  Given limited fiscal flexibility, most governments are focusing on infrastructure investments, structural reforms, and attracting foreign direct investment to revive economic growth.  Key risks in the quarters ahead include the ongoing effects of COVID-19, protectionism, and trade war escalation.