Emerging market stocks are having a difficult time in the COVID-19 crisis, but not all industries—or countries—are struggling. And many businesses have the right qualities to benefit from structural changes now and long after local conditions improve.

During the COVID-19 crisis, investor flight to safety assets and a strong US dollar battered emerging market (EM) stocks this year. But after regaining some ground in June, the MSCI Emerging Markets Index was down by just 3% through July 15, in US-dollar terms, which is similar to the performance of developed markets. From Taiwan to Poland, some EM countries have excelled more than others at controlling the pandemic’s spread and preventing deaths, and even better than have some developed countries. As the battle to defeat the virus prompts changes to consumer and corporate behavior, pockets of EM investment opportunity are opening that likely will endure well beyond the pandemic.

Virus Response Varies by EM Country

Nine of the 10 countries with the most new coronavirus cases are in EM (the US is the only developed country of the 10). Some of the largest South Asian countries, including India, the Philippines and Indonesia, are still struggling to contain the spread of COVID-19. In Latin America, countries such as Brazil, Mexico, Chile and Peru are still seeing rapid growth in new cases.

But the three EM countries most effective at containment—China, Taiwan and South Korea—account for more than 60% of the EM benchmark. They, and other EM standouts like Malaysia and Thailand, have remarkably reduced cases to less than 10% of their respective peaks (Display).

If this success persists, these countries can begin the road back to normal and resume economic growth sooner than the US. And such countries may be fertile ground for finding EM winners, based on bottom-up research and risk/reward analysis on individual companies.