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Emerging-markets equity: 2023 outlook

December 8, 2022
clock 6 MIN READ

A strategic choice

While some investors tend to be overly bullish or bearish on events in emerging markets at any given time, particularly with regard to China, we believe emerging market equities are a strategic choice for diversified portfolios regardless of market conditions and we are reasonably optimistic going forward.

Current issues facing emerging-market equities

When investing in emerging markets, there always seems to be crisis somewhere in the world and even occasional systemic shocks. That noted, 2022 has been quite eventful as reflected by spike in market volatility.

This year’s turmoil started with Russia’s invasion of Ukraine, which led to the decimation of Russian stocks. This was followed by a second-quarter rally in Chinese stocks as stringent COVID-19 lockdowns there began to ease. Optimism was quickly dashed as a few new COVID-19 cases set in motion China’s “Zero COVID” policy—major cities were locked down, the economy was paralyzed, and consumer discretionary stocks plunged.

It was not just the domestic side of emerging-markets economies that faced challenges either; the outlook for exports has been just as gloomy. The expectation of a global demand slowdown triggered considerable declines in the stocks of global manufacturers. Even TSMC (Taiwanese Semiconductor Manufacturing Co.)—historically a bellwether of quality stocks—has lost roughly a third of its market value so far this year. As if these concerns were not enough, China is struggling with a whole host of issues that have led to foreign capital outflow of roughly US$8 billion just in October.

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Important information

This material represents an assessment of the market environment at a specific point in time and is not intended to be a forecast of future events or a guarantee of future results. Positioning and holdings are subject to change. All information as of the date indicated. There are risks involved with investing, including possible loss of principal. This information should not be relied upon by the reader as research or investment advice, (unless you have otherwise separately entered into a written agreement with SEI for the provision of investment advice) nor should it be construed as a recommendation to purchase or sell a security. The reader should consult with their financial professional for more information.

Statements that are not factual in nature, including opinions, projections and estimates, assume certain economic conditions and industry developments and constitute only current opinions that are subject to change without notice. Nothing herein is intended to be a forecast of future events, or a guarantee of future results.

Certain economic and market information contained herein has been obtained from published sources prepared by other parties, which in certain cases have not been updated through the date hereof. While such sources are believed to be reliable, neither SEI nor its affiliates assumes any responsibility for the accuracy or completeness of such information and such information has not been independently verified by SEI.

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