Emerging market equities are moving back towards the centre of investor attention, helped by a near-term improvement in risk appetite and a broader shift in how investors are thinking about portfolio construction. The immediate trigger has been a rally across emerging market assets on expectations that the Iran conflict could move towards resolution, a move that has also been supported by a weaker US dollar. That combination has lifted both equities and developing-world currencies.
Emerging markets have spent much of the past decade competing for capital in an environment dominated by the US, a strong dollar and a relatively narrow set of market leaders. That backdrop now looks less fixed. As leadership broadens beyond the US and style rotations become more abrupt, the case for a more balanced exposure to emerging markets is becoming harder to ignore.
Improving earnings trends, more attractive relative valuations and the possibility of a different dollar cycle all strengthen the argument that emerging markets could play a larger role in global equity portfolios.
Fidelity Emerging Markets Limited (LON:FEML) is an investment trust that aims to achieve long-term capital growth from an actively managed portfolio made up primarily of securities and financial instruments providing exposure to emerging markets companies, both listed and unlisted.
