Emerging Markets Record Mixed Performances in February

Emerging market equities saw mixed performances in February, with stocks in Asia faring better than stocks in Latin America and emerging Europe, which underperformed. Franklin Templeton’s Emerging Markets Equity team outlines what drove market moves during the month and where they see opportunities today. They see reasons to be optimistic about Brazil in particular.

Three Things We’re Thinking About Today

    1. US President Donald Trump’s decision to delay the March 1 tariff hikes following progress in trade talks reduced global tensions. Reports that US and Chinese negotiators are working on the final details of a US-China trade deal boosted sentiment towards emerging markets (EMs). We remain cautiously optimistic as the United States and China continue to resolve their differences, while their trade relationship evolves. Even with a trade deal, however, long-term strategic rivalry is likely to continue. We also expect the Chinese government to continue supporting the domestic economy, as evidenced by the recent implementation of targeted fiscal and monetary policies. We will continue to monitor the situation and look for attractive investment opportunities—likely in sectors related to health care, consumption and manufacturing upgrades, which over the long term, are less directly impacted by tariff regime changes.
    2. Nuclear-armed rivals India and Pakistan faced their worst crisis in years during February over disputed territory in Kashmir. However, both countries have expressed that they do not wish to see further escalation of the situation. While one cannot rule out more border incursions from both sides, we believe chances of escalation are limited due to mounting international pressure calling for restraint. Recent developments are also viewed positively, with Pakistan releasing the captured Indian fighter pilot and taking steps to restrain terrorists. In our view, the current conflict has limited impact on investment strategy, and we retain conviction in our holdings in India and Pakistan. We are monitoring the situation closely, which remains fluid at this point.