The backdrop for equities in emerging markets is turning more positive as the U.S. dollar weakens and China reopens its economy after stringent COVID-19 restrictions, according to BlackRock, the world’s largest asset manager.
“We think the long EM stock slide and recent rally show a lot of economic damage is now in the price,” Li and other BlackRock investment strategists said in the note. Emerging-market rates are peaking, while the U.S. dollar’s retreat and China’s reopening rally have also helped emerging-market assets in recent months, they wrote.
“A pause in the Fed’s rate hikes would likely help spur a further retreat in the U.S. dollar,” according to the BlackRock note. Meanwhile, “the damage of higher rates has yet to fully materialize” in developed markets , the strategists said. “We prefer selected EM equities and bonds over DM peers.”