New Stars are reshuffling the landscape within the Emerging Markets space

For the past 30 years China has undoubtedly been the front runner within the Emerging Markets (EM) space. However new stars are rising, like India, and new drivers of growth like digitalization and innovation are fueling EM growth.

This creates an appealing investment opportunity, as these countries and trends will contribute up to 45% of the world global GDP growth in the next years[1].

;
Meet the Team
The investment team consist of 7 professionals with 7 different nationalities. With 14 up to 17 years of experience, the lead managers for the strategy are Vivek DHAWAN, CFA, CMT, and Galina BESEDINA, under the leadership of Paulo SALAZAR.

The new stars in the EM universe

India potentially delivers growth (7%+) in a slowing world (2%+) while corporate earnings are on the rise, supported by a strong demographic trend

Mexico largely benefits from nearshoring related investments, as US companies outsources their process over the border

Brazil, after heavy lifting on inflation and stepping up on monetary easing, is to see its domestic cyclical demand to pick up in the coming years

Indonesia is set to be the 6th largest economy in the world by 2027, bolstered by the demographic advantage

Taiwan is riding the semiconductor recovery and playing the “picks and shovels of the Artificial Intelligence gold rush”

Korea is following Japan’s playbook on corporate governance to improve profitability and higher inflows, with strong tailwinds driven by the memory semiconductors, artificial intelligence and electric vehicles  

Deep ESG Analysis matters more in the EM space

ESG analysis in Emerging Markets is complex: These markets range across continents and cultures, and vary widely in their characteristics (legal framework, political systems and governance…).

To tackle this challenge, Candriam has developed a rigorous and specific ESG analysis process to recognize the complexity of Emerging Market issuers. Using Candriam’s proprietary framework, our 20+ dedicated ESG Analysts team focuses on:

  • Filtering out companies breaching Human Rights, Labour Rights, Environment and Anti-Corruption regulations.
  • Monitoring exposure in relation to Weapons and Controversial Activities, for example activities exercised in oppressive regimes.
  • Corporate Governance practices in relation to Investors, Human Capital, Clients, Suppliers, Society and Environment.
  • The company’s business activity positioning towards Global Sustainability Challenges

The impact of ESG investing in emerging market equities
Can integrating ESG factors in
emerging market equity investing create value?
Read the Paper

Building a portfolio with Advanced ESG features may benefit investors

  • Potentially reduced Risk through reduced volatility and geopolitical tail risks, as on average, Chinese companies have lower ESG scores than those in other EM.
  • Potentially positive Outperformance on the long run, as our research demonstrates that the Candriam EM ESG Eligible universe provides an annual performance of +2.4% vs. the MSCI© EM Index[3].
  • As a consequence, the UCITS-compliant Candriam Sustainable Equity Emerging Markets Ex-China  fund is actually the only SFDR Article 9 fund available to investors. 

Your Investment makes better companies

Engagement is one of the most powerful ways to create real-world outcomes. Candriam engages – on our clients’ behalf – in dialogue with issuers to influence their activity and/or behavior, through both direct/collective engagement and voting-related activities. We consider active ownership, and engagement in particular, as core contributors to risk mitigation but also to the protection and enhancement of long-term value creation for our clients.

 

Candriam 2023 Annual Engagement & Voting Report

FUNDS

Candriam Sustainable Equity Emerging Markets Ex-China

Risks & Reward

  • Through an active portfolio management, the objective of the fund is to generate medium- to long-term capital appreciation with consistent, risk-adjusted excess returns relative to the MSCI Emerging Markets ex China (Net Return), with an ex-ante tracking error over 4%.
  • Main Risks factors associated with the fund:
    • Risk of loss of capital
    • Equity risk
    • Foreign exchange risk
    • Emerging markets risk
    • ESG investment risk

This list of risks is not exhaustive. To fully understand the fund risk profile, Candriam advises investors to carefully review the legal and regulatory documents (Prospectus & Key Information Document) and the description of the underlying risks, before making any final investment decision.

Summary Risk Indicator:

       

  • The summary risk indicator is a guide to the level of risk of this product compared to other products. It shows how likely it is that the product will lose money because of movements in the markets or because we are not able to pay you.
  • We have classified this product as class 4 out of 7, which is a medium risk class. This rates the potential losses from future performance at a medium level, and poor market conditions could impact the capacity to pay you. The risk indicator assumes you keep the product for 6 years. The actual risk can vary significantly if you cash in at an early stage and you may get back less.

[1] Source: 1. IMF, World Economic Outlook Database, Apr 2023 2. Wei, Xu, Xu. MSCI, Foundations of Dedicated China Allocations: Part 2 - MSCI
[2] Source: Candriam
[3] Scope: MSCI Emerging Markets Universe over a 10-year period , 2008-2018 Source: The MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries. With 1,398 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. It is not possible to invest in an Index. Past performance does not guarantee future results “Impact of ESG Investing in EM” Study by Candriam ESG Team, ESG criteria applied: Norms-based, controversial activities and governance screenings combined with an assessment on key sustainability trends (Climate Change, Resource Depletion, Demographic Evolution, Interconnectivity, and Health and Wellness), Past performance is no guarantee of future results and is not constant over time; © 2023 MSCI Inc. All rights reserved. Warning: Past performance of a given financial instrument or index or an investment service or strategy, or simulations of past performance, or forecasts of future performance does not predict future returns.

Expertise

Thematic

Find it fast

Get information faster with a single click

Get insights straight to your inbox