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Can bombed out emerging markets catch up?

Emerging markets funds focused on troubled markets could benefit as coronavirus vaccines are deployed
Can bombed out emerging markets catch up?
  • To back struggling markets that could benefit from the deployment of coronavirus vaccines you could tilt from Asia to the emerging markets
  • Some funds offer exposure to Latin America and Russia, but these are risky trades

Those who expect a vaccine to keep driving hefty gains for last year’s stock market losers could do worse than look to the emerging markets. While the MSCI Emerging Markets index performed strongly in 2020, much of this stems from its heavy weightings to China, Taiwan and South Korea. These three markets, which made up around two-thirds of the index at the end of 2020, each delivered sterling total returns of between 26 and 40 per cent last year. 

Yet plenty of emerging markets have had a much worse time of it, and look set for a potential recovery as the world slowly moves out of the coronavirus crisis. Brazil has had an especially severe pandemic, with the country recording some 217,000 deaths as of late January. India and Mexico have had their own severe outbreaks. Russia, meanwhile, could benefit not only from an eventual containment of the virus but also from a recovery in oil prices.

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