The investment team at CI Capital Asset Management said in their end-of-year report that emerging markets, except for China, have attractive stock valuations and positive real returns in their debt markets, which may increase as inflation stabilizes. They expect more investor interest in the coming period.
The report showed how some emerging countries suffered from the loss of investor confidence after the inflation surge and the war in Ukraine in early 2022, especially Turkey and Egypt, where inflation reached about 60% and 35%, respectively.
The report used Egypt as an example of a market hit by fears that became a “self-fulfilling prophecy.” When foreign investments fled at the start of the global crisis, Egyptian officials quickly reduced the trade deficit and met all external obligations during the year. However, negative reports persisted, and Egypt’s credit rating was downgraded – based on the government’s alleged delay in implementing reforms – and Egyptian assets, currency, and bonds, including dollar bonds, dropped in value.
This led to Egypt’s dollar bonds yielding 17-18%, which was higher than Egypt’s local currency bonds a year and a half ago! With the improvement in investor sentiment, which started in recent months, as Egypt’s dollar bonds rose to yield about 13-14%, and may continue, especially if the US changes its monetary policy, there may be a lucrative investment opportunity in this sector, which was severely affected by the recent crisis.
CI Global Asset Management is one of Canada’s largest investment management firms. It provides a wide range of investment products and services. CI Global Asset Management is a subsidiary of CI Financial Corp., a global asset and wealth management company with $438bn in total assets as of 30 November 2023.
