Investors in emerging markets took fright when Donald Trump won the US election, pulling tens of billions of dollars from investment funds over fears that the new president’s policies would usher in a wave of problems for the asset class.
Half a year later, investors have shrugged off concerns about a so-called Trump slump. They are moving back into emerging markets in an attempt to generate returns in the low-yield environment and exploit strong economic growth in countries from India to Colombia.
Emerging market funds registered their 10th straight week of inflows in the week ended May 24, the same week Moody’s downgraded the sovereign credit rating of China, the biggest country in the asset class. But emerging markets — which are home to 80 per cent of the world’s population — are not for the meek. Witness the carnage that occurred in 2008 when the MSCI emerging markets index, which includes more than 20 countries such as Russia, South Africa and the Czech Republic, lost more than half its value in one year.