Emerging markets likely to gain from global recovery

A food-processing plant in China. The country's rise over the past decade has led to an increase in intra-regional trade, which has been positive for Asian markets.
A food-processing plant in China. The country's rise over the past decade has led to an increase in intra-regional trade, which has been positive for Asian markets.PHOTO: AGENCE FRANCE-PRESSE

Emerging market economies are likely to benefit from the global economic recovery - spelling good news for stock markets in countries like Brazil and Russia, said investment firm Franklin Templeton.

Many emerging markets are commodity producers and thus geared to commodity prices, it said.

The recovery in commodity prices amid the global economic recovery has been a major positive for these economies.

During the 2008 global financial crisis, emerging markets hit a very bad patch because commodity demand weakened as a result of the contraction in global growth.

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China's rise over the past decade has led to an increase in intra- regional trade which has been positive for the Asian markets.

"Emerging markets are looking more towards China for trade and sales rather than the West," said Mr Chetan Sehgal, executive vice- president and director of global emerging markets and small cap strategies for the Templeton Emerging Markets Group, at a media briefing yesterday.

He added that emerging market companies are now incorporating more technology into their businesses which should add to the sustainability of their business models.

In terms of global outlook, the firm is generally positive with regard to growth in the coming year.

"Macro indicators are still signalling a positive growth outlook and financial conditions are strong across Brazil, Germany, India and Japan," said Mr Brooks Ritchey, senior vice-president and director of investment solutions at Franklin Templeton Solutions.

He said global business cycles remain positive and the recession risk is low. But the global political and fiscal uncertainty arising from events such as the French elections and potential United States tax reforms could limit capital expenditure and weaken investor sentiment.

A version of this article appeared in the print edition of The Straits Times on May 19, 2017, with the headline 'Emerging markets likely to gain from global recovery'. Print Edition | Subscribe