As the world watches the US-China trade spat roll on, it is important to look beyond the headlines and examine the economic reality and progress within emerging markets, according to Franklin Templeton Emerging Markets Equity’s Andrew Ness. He explains why investors should pay attention to the economic evolution taking place in emerging-market economies.
Maintaining perspective matters, particularly when we consider emerging markets. Despite ongoing US-China trade discussions, intra-emerging markets trade has blossomed in recent years—with China replacing the United States as the largest export destination for other emerging markets as a whole.1 However, there have also been some positive developments in other emerging markets that have flown under the radar.
Three decades ago, emerging market economies typically relied on commodity exports. Those exports drove economic development and manufacturing, and also contributed to the creation of global supply chains.
Since then, emerging markets have evolved through structural reforms and improved regulation, so we’ve seen improved resilience. In addition, heightened domestic demand has helped many of these countries grow irrespective of external forces.
However, we believe there are still some emerging-market developments that remain under-appreciated.