Emerging market stocks may be at a turning point in 2019, BlackRock manager says

Emerging markets may be at a turning point in 2019 as interest rate tightening around the world pauses and sentiment improves, a BlackRock portfolio manager said.

Gordon Fraser, a manager for BlackRock’s global emerging equities portfolios, said valuations among emerging markets stocks are quite attractive right now, particularly when compared to developed markets.

BlackRock is the world’s largest asset manager, and had U$5.98 trillion in assets under management as of the end of 2018.

“The liquidity environment is improving. In our view, liquidity drives asset prices, particularly in emerging markets, more than economic activity,” Fraser said. “Many of the key challenges ailing emerging markets last year have been surmounted. I think the global interest rate environment is shifting back in emerging markets favour.”

Fraser said he believes that central banks will be more supportive of emerging market economies this year, with no need for additional rate increases and some central banks even easing rates. Many emerging markets have seen their rates rise in line with the rate rises by the US Federal Reserve in the past year. Indonesia is one of his top picks, where the economy is improving.

“We see attractive valuations and we think Indonesia will benefit from the change in the interest rate environment globally,” Fraser said. “Indonesia is one of the emerging markets that is most sensitive to US rates.”