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Overview
A Whole New World
The spread of COVID-19 has upended the outlook for the world’s economies and generated violent market moves. We provide a framework designed to identify where it makes sense to invest now.
The past quarter has been brutal for risk assets: equity markets
experienced one of their worst sell-offs in history, with the MSCI
Emerging Markets (EM) declining by 23.6% and some markets
falling by as much as 50%. This primarily owed to the spread of
the novel Coronavirus from China to the rest of the world and
the related lockdown measures plus, to a lesser extent, the sudden
flare-up of an oil price conflict between Russia and Saudi Arabia.
Such radical price moves are seemingly opening up new opportu-
nities. Although the trailing P/E discount of the MSCI EM to the
MSCI World remains in line with its long-run average (at 27%),
the cyclically-adjusted P/E (CAPE) of EM has fallen to 10.9, 14%
below even the March 2009 level. To identify investment oppor-
tunities amidst the fog of market uncertainty, our framework
focuses on four factors: 1) more than usual, the change in valua-
tion metrics, 2) the cyclical position and dynamics of each country
prior to the outbreak, 3) the status of infections and public health
policy in each country and 4) the economic policy response.
1. Valuations: Several countries which have mostly weathered the
outbreak (China) or addressed it effectively (Taiwan) already trade
at higher P/Es than their long-run average. Others are now 2-3
standard deviations below their historical average. In cyclically-ad-
justed terms, some countries like Brazil trade at a P/E far higher
than their historical minimum, despite a ca. 50% market decline.
Others, like Korea or Turkey, have CAPEs as much as 20% below
their March 2009 low. What is more, South Africa and Malaysia
are also at all-time historical lows in terms of their CAPEs.
2. Cycle: Most EM countries entered the year on a weak growth
footing. That is, they were growing below potential (e.g. Mexico,
Brazil, South Africa, Malaysia, as well as China). Despite this,
some economies were stabilising (e.g. Korea and Russia), while
others were gaining momentum towards year-end, such as India.
Others yet were gathering significant steam and expanding above
potential, such as Turkey and the Philippines.
3. COVID-19: The response to the spread of the virus is key for
the outlook, not least because it determines both the duration and
the depth of the economic impact. While much remains uncertain
about contagion dynamics, broadly speaking, aggressive early
Authorised and regulated by the Financial Conduct Authority. Registered as an Investment Advisor with the SEC. Regulated by the DFSA. Registered Office: 77 Gracechurch Street London EC3V 0AS
containment measures deepen the recessionary impact in the near
term, but may also shorten it. Unfortunately, several (often auto-
cratic) leaders in EM have long denied the severity of the crisis and
thus delayed the policy response, aggravating the problem. They
include Brazil, Mexico, India, the Philippines, Turkey and, to a
lesser extent, Russia. To better assess each country’s vulnerability
to the spread of COVID-19, we have created an index that aims
to provide a comprehensive measure. We assess each country’s
medical resources (hospital beds, number of physicians, testing
capacity), demographic characteristics (age structure, malnutri-
tion), living conditions (urbanisation, slum dwellings, household
size) and economic structure as far as it affects susceptibility to
infection (size of the informal economy, population below the
poverty line). The main results for some key emerging markets
are presented in Chart 1. Our index identifies India and Thailand
as being particularly vulnerable, whereas Russia and Turkey are
comparatively better placed.
4. Economic Policy: Many emerging economies have to deal not
only with a double supply shock thanks to supply chain disrup-
tions and a commodity price drop, but also with a sudden slump
in demand for their exports. What is more, they are faced with
capital outflows worse than during the 2008-09 global financial
crisis. As a result, the EM policy response arrived swiftly and
radically, even though it is constrained by the low starting level
of interest rates and limited fiscal space. This has required resort-
ing to unorthodox policy measures. Nevertheless, to a surprising
extent, policies in EMs are broadly similar, differing primarily in
timing and scale.
Some policy responses have arisen out of necessity, such as the FX
interventions in Russia, Brazil, Mexico and Egypt. Encouraged by
the unprecedented policy response in the US and other developed
markets (DM), emerging market economies also began to experi-
ment with their own version of QE: Korea, the Philippines, Poland,
South Africa, Chile and Colombia all announced such plans. Fiscal
policies mostly focus on tiding businesses and households over the
lockdown period: they offer interest and loan forbearance, loans
or guarantees to small businesses and income support to needy or
critical segments of the population. They do not at present aim to
provide economic stimulus beyond the lockdown period. In this,
fiscal and monetary policies are becoming increasingly intertwined
and some countries are straddling the limits of monetary deficit
financing (e.g. India). Some countries have announced very large
fiscal support packages (5% of GDP or more) such as China and
Korea, others have announced merely large ones (2-3.5% of GDP)
Emerging Markets Quarterly OutlookApril 2020*
CITY OF LONDONInvestment Management Company Limited
*The publication reflects asset performance up to 31 March, 2020, and macro events and data releases up to 8 April, 2020, unless indicated otherwise.
2
such as Brazil, Turkey, Russia, Thailand and Malaysia, whereas a
third category has only taken the first steps so far (1% of GDP or
less): India, Mexico, the Philippines and Indonesia.
Market StrategyIt is worth noting that the recently released economic outlook by
the IMF foresees a global economic contraction of 3.0% in 2020
(much worse than the -0.1% contraction during the GFC), com-
prising a 6.1% decline in DM, but only a 1.0% contraction in EM.
What is more, only 10% of all countries are expected to experience
growth this year (compared to 40% during the GFC), although
they include the two most populous, India and China.
This range of conditions and their policy responses provide a
challenging environment for investment decisions. Our allocation
framework is designed to systematize this assessment. As such, it
will require continuous updating as the virus spreads and health
and economic policies adapt. At present, we have made the follow-
ing changes to our country allocation:
• Downgrade China A-shares to underweight: Despite early
success in containing the virus, A-shares are not cheap enough
to reflect the prospect of a global recession.
• Upgrade Malaysia to overweight: The market is the cheapest
in EM on a CAPE basis, while the policy response has been
vigorous.
• Upgrade Vietnam to overweight: There has been a good
public health and economic policy response. Valuations are
attractive against solid fundamentals.
• Upgrade Turkey to neutral: Equity valuations are at a historical
low while the economy has bounced back.
• Downgrade Romania to neutral: Financial and health measures
have been mediocre, with room for further fiscal easing limited.
• Upgrade South Africa to neutral: Valuations are cheap. The
health response has been good, including lockdowns and
flight bans, and financial policy has also been strong.
Chart 1: CLIM Virus Vulnerability Index (VVI)*
Source: City of London Investment Management
Asia
ChinaUnderweight (↓)
The economy is vulnerable to a global recession despite China’s success in containing the disease.
*Required Deposit Reserve Ratio for Major Banks. **US$ total return relative to MSCI EM. Source: Bloomberg
COVID-19 abruptly halted a tentative recovery that the Chinese
economy had enjoyed on the back of a Phase 1 deal between
China and the US. That said, China has managed to contain the
virus with strict measures such as the lockdown of Hubei prov-
ince, nationwide mobility restrictions and social distancing. Daily
reported infections peaked as early as the first week of February.
After plummeting in January-February (Chart 2), economic activ-
ity gradually normalised in March with workers able to return to
factories. While the lockdown-induced supply chain disruption
has faded, China faces two demand shocks due to the pandem-
ic. First, domestic demand for services (e.g. in-mall shopping,
catering, leisure, tourism and passenger transport) is recovering
only slowly from a depressed level as people exercise caution and
certain mobility restrictions remain in place to impede imported
COVID-19 cases and a potential second wave of local outbreaks.
Second, export orders are plummeting as the lockdown in most of
Europe and the US induces suspension of economic activity and
a global recession.
Large policy support has been put in place since the virus out-
break, and more is expected to come as China braces for a global
recession. As early as February, the central bank (PBoC) deployed
unconventional measures such as re-lending and re-discounting
facilities of RMB 1.8trn ($256 bn) to lend cheaply to manufac-
turers of medical supplies and daily necessities. This was followed
by a liquidity injection of at least RMB 3trn ($427 bn) into the
banking sector as well as various policy rate cuts (short-term
reverse repo rates, the medium-term lending facility rate and
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Russ
ia
Rom
ania
Viet
nam
Turk
ey
Taiw
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Mal
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Indo
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Mex
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Bra
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Phili
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More vulnerable
Less vulnerable
3Y history
GDP, % yoy 6.0 Q4
PMI, index 52.0 Mar
CPI, % yoy 5.2 Feb
Policy rate, %* 12.50 Mar
MSCI China** 13.4% Q1
EPS, % yoy 1.4 Mar
Trailing P/E 12.6 Mar
Latest
*Where 100 indicates the highest score (most vulnerable) and 0 the lowest (least vulner-able). Expressed as deviation from the baseline at 50.
3
required reserved ratios). The Ministry of Finance has also stepped
up fiscal spending, tax reliefs, local-government bond issuance and
infrastructure investment (e.g. 5G and urban transport).
However, it is worth emphasising that the monetary, credit and
fiscal easing this time looks different from that seen in 2008/09
and in 2015/16 for three reasons. First, the decline in global
demand in 2020 may be more severe than previously. Policy
stimulus may at best help boost Chinese economic growth to
around potential in H2 2020 as opposed to above it, as was the
case in 2008/09 and 2015/16. Second, easing is more targeted
and calibrated towards COVID-19-affected sectors this time, and
hence broad credit growth is unlikely to jump substantially as in
the previous two episodes. Third, real estate has become the least
favourite channel of easing due to concerns about housing afford-
ability and financial instability. That also suggests a more modest
growth boost given the importance of real estate in the economy.
All in all, consensus expects GDP growth to fall to around 3% this
year from 6.1% in 2019, the biggest annual drop since the GFC.
Chart 2: Chinese Economic Activity
Source: National Bureau of Statistics of China, Bloomberg
Market Strategy: The trailing P/E ratios of MSCI China and
MSCI China A are at a 6% and 26% premium, respectively, to that
of MSCI EM, higher than the five-year average of an 8% discount
and 21% premium, respectively. We downgrade A shares to under-
weight while remaining neutral on the rest of Chinese equities.
A-shares significantly outperformed other equity markets in Q1,
and ChiNext (an equivalent of Nasdaq in China) was the only
bourse in the world delivering a positive return over the period.
This was driven by China being the first to contract and, crucially,
contain COVID-19 as well as retail investors’ optimism about
Chinese tech companies. That said, valuations look unattractive
given the backdrop of a global recession. Indeed, a halving of
GDP growth from last year would resemble an economic “hard
landing” scenario that analysts have long feared and would have a
severe impact on company earnings.
South KoreaOverweight
Successful virus containment, policy stimulus and resilient memory prices support stock prices.
*US$ total return relative to MSCI EM. Source: Bloomberg
South Korea’s economy had been recovering on the back of easing
trade tensions and stabilising memory prices prior to the COVID-
19 outbreak. The outbreak of the virus led to a lockdown in
China and a disruption to the Asian supply chain before spreading
to South Korea, hitting domestic economic activity. In response,
the Korean public health authority implemented a comprehensive
policy of testing, tracking and treating COVID-19 patients. The
measures, while short of imposing a nationwide lockdown, have
successfully contained the spread of the virus: daily reported infec-
tions declined from 850 at the beginning of March to merely 100
most recently among the 51 mn population.
The government has been innovative with respect to its economic
policy response. On top of a 50bps cut in the base rate, the Bank
of Korea (BoK) pledged an unlimited amount of purchases via
open market operations (OMO), expanding the list of eligible
OMO participants and collateral as well as purchasing treasury
bonds (1.5trn Korean won). The BoK also opened a $60bn swap
line with the Fed and eased FX regulation for the banks in order
to stabilise the currency market. Meanwhile, President Moon
announced a financial stabilisation plan worth 5.3% of GDP, cov-
ering lending to SMEs, corporate bond purchases, money market
financing and stock market purchases. Fiscal expenditure is expect-
ed to increase by 11.4% yoy in 2020.
Market Strategy: MSCI Korea’s P/B ratio of 0.7 times is the
lowest in almost 20 years. Its CAPE ratio has hit an all-time low
and is 11% below the March 2009 level (the trough in the GFC).
Memory prices have been resilient - DRAM up 17% ytd and
NAND up more than 25% ytd – on the back of increased demand
for online services during the pandemic. We remain overweight
South Korea on the back of very cheap valuations, the successful
containment of the virus, the economic policy stimulus and resil-
ient memory prices.
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Retail sales, cumulative yoy %Fixed asset investment, cumulative yoy %
3Y history
GDP, % yoy 2.3 Q4
PMI, index 44.2 Mar
CPI, % yoy 1.0 Mar
Policy rate, % 0.75 Mar
MSCI South Korea* 1.2% Q1
EPS, % yoy -48.4 Mar
Trailing P/E 14.4 Mar
Latest
4
TaiwanUnderweight
The Taiwanese market is vulnerable to a global recession.
*US$ total return relative to MSCI EM. Source: Bloomberg
Sino-US trade tensions last year led to an adjustment of the
regional supply chain such as re-shoring and increased investment
in Taiwan. Output was also better than expected in Q1 2020 as
companies increased production in Taiwan amidst the factory
lockdown in Mainland China. This temporary boost faded as fac-
tories in China resumed work. Now, instead, Taiwan is braced for
a global recession induced by Europe and the US.
Taiwan has not been spared from the pandemic. However, the
public health authority has drawn valuable lessons from the SARS
outbreak in 2003. They were alerted about COVID-19 as early
as December 2019 and since then have implemented compre-
hensive social distancing, tracking and treatment measures. Only
five patients have died to date from the pandemic. The economic
policy response has been modest and slow relative to the public
health response, with the special budget amounting to less than
1% of GDP. Apart from a 25bps rate cut in March, a large and
comprehensive relief package was not announced by the cabinet
until April. The package could involve salary subsidies and loans
to industries affected by the pandemic.
Market Strategy: MSCI Taiwan declined by approximately 21%
in USD terms from the peak in January, but its CAPE ratio is still
40% above the level in March 2009. Meanwhile, Reuters reported
that the US administration was drawing up new rules effectively
forbidding Taiwanese companies from supplying chips to Huawei
and other Chinese firms currently sanctioned by the US. Such
rules, if implemented, would weigh on the revenue of Taiwanese
I.T. firms and cause new uncertainty around the Asian tech supply
chain. Therefore, even though Taiwan has successfully contained
COVID-19, we remain underweight as valuations do not fully
reflect the impact of a global recession and the continued tech
rivalry between the US and China.
MalaysiaOverweight (↑)
The economy is likely to slip into recession, but the strong policy response is set to limit the downside.
*US$ total return relative to MSCI EM. Source: Bloomberg
Malaysia’s economy was decelerating prior to the outbreak of
COVID-19 and now faces a recession in 2020. The fall in global
trade as a result of various lockdowns along the supply chain will
likely be a significant drag for the economy, with trade accounting
for 131% of Malaysia’s GDP. Household consumption (57% of
GDP) is also set to contract. The median private sector estimate
is for a 1.5% yoy GDP contraction in 2020, which would match
that experienced during the GFC. However, estimates vary widely:
from a 5.8% fall to a 1.3% rise. The central bank’s (BNM) forecast
ranges from -2.0% to +0.5%.
Monetary and fiscal stimuli have been significant, which should
cushion the blow from the virus. BNM cut its key policy rate
by 50bps to 2.5%, which is still 50bps above the historical low
reached during the GFC. Further rate cuts are likely. BNM has
attempted to ease liquidity concerns too. The Bank lowered the
statutory reserve requirement from 3% to 2%, which will allow
banks to have a liquidity coverage ratio below 100% and declared
a six-month moratorium on all bank loans. A fiscal package worth
2.3% of GDP was also announced. This was mainly aimed at sup-
port for SMEs and welfare programmes, including cash handouts,
rent exemptions and reduced energy prices.
Other policymakers have also responded strongly, with a nation-
wide lockdown implemented in March. COVID-19 testing more
than trebled from 422 per million inhabitants on March 20 to
1,456 on April 3. This should better inform policy decisions and
augurs well for containing the virus.
Market Strategy: Valuations for MSCI Malaysia are cheap. The
CAPE is 10% below its historical low and given the robust pol-
icy response, the market offers value in our view. We therefore
upgrade our allocation to overweight.
3Y history
GDP, % yoy 3.3 Q4
PMI, index 53.1 Mar
CPI, % yoy -0.2 Feb
Policy rate, % 1.13 Mar
MSCI Taiwan* 4.5% Q1
EPS, % yoy -6.9 Mar
Trailing P/E 15.2 Mar
Latest3Y history
GDP, % yoy 3.6 Q4
PMI, index 48.4 Mar
CPI, % yoy 1.3 Feb
Policy rate, % 2.50 Mar
MSCI Malaysia* 4.4% Q1
EPS, % yoy -0.6 Mar
Trailing P/E 15.4 Mar
Latest
5
IndonesiaNeutral
Cheap equity valuations reflect a relatively muted fiscal and public health response to COVID-19.
*US$ total return relative to MSCI EM. Source: Bloomberg
Indonesia’s already weak economy took another hit as a result of
the pandemic. Retail sales had been stagnating at the beginning
of the year before contracting by 5.3% yoy in March. House prices
are declining in real terms. Domestic demand and credit growth
continue to slide despite monetary easing, liquidity injections
and the central bank’s intervention to stabilise the bond and FX
markets.
Economic imbalances and the relatively muted public health and
fiscal responses to COVID-19 limit the success in containing the
disease and any economic recovery. Persistent current account
and fiscal deficits as well as small domestic savings mean that
the economy relies on external financing. That, in turn, prevents
the government from borrowing substantially in the market and
launching a sizable fiscal stimulus amidst the pandemic – so far the
fiscal package amounts to less than 0.5% of GDP. Capital outflows
have led to a rise of more than 100bps in 10-year government
bond yields despite the 50bps interest rate cut, further limiting
fiscal space. Meanwhile, the public health response has been slow
to contain the spread of the disease. Indonesia has the highest
case fatality rate among the major ASEAN countries, suggesting
a poor medical system and inadequate antigen testing amongst its
264 mn population.
Market Strategy: The Indonesian market’s CAPE ratio at the
end of March was 31% below the March 2009 level (the trough
during the GFC). However, the financial (banks, real estate) and
consumer (staples and discretionary) sectors make up 70% of
MSCI Indonesia, and both face significant headwinds. A limited
fiscal and public health response also suggest that it may take a
relatively long time to contain the disease in Indonesia while the
post-pandemic recovery may be weak. Therefore, we remain neu-
tral on Indonesian equities.
PhilippinesOverweight
A sharp slowdown could be cushioned in H2 by infrastructure build-out.
*US$ total return relative to MSCI EM. Source: Bloomberg
The Philippines had a strong growth outlook going into 2020.
However, uncertainty began to rise in January when President
Duterte and, significantly, his administration spoke of renegoti-
ating government contracts with a broad range of private sector
companies. The outlook was then severely hit by COVID-19, with
case numbers rising nearly tenfold in the two weeks to April 6. The
central bank (BSP) estimates growth could slow to 5.0-5.5% this
year, from 5.9% in 2019, but this appears optimistic. Private sector
estimates range from -3.5% to +4.0%, with the median of 1.7%
seemingly more realistic given a partial lockdown of the country
and the weak external backdrop.
BSP has cut its key policy rate by 75bps in 2020 to 3.25%
and reduced the RRR for banks by 200bps in March. It also
announced its first quantitative easing programme, worth PHP
300 bn ($6 bn) and equivalent to around 1.6% of GDP. Fiscal
stimulus has been small so far (0.2% of GDP), but a further and
larger package is expected. This will help cushion the economic
downside from COVID-19, while plans to speed up infrastructure
buildout could provide a boost in H2.
Health measures to contain the virus have been good, with a
lockdown of Luzon island, which contains half the population,
through end-April. Only Filipino citizens and those with perma-
nent residency can enter the country. Given a large number of
overseas workers in China, one key measure has been a mandatory
14-day quarantine for Filipinos returning from Greater China.
However, testing levels are low and need to improve to aid policy
decisions.
Market Strategy: MSCI Philippines’ P/E premium over EM is
low, at 2.5 standard deviations below its five-year average. We
believe this is sufficient to keep the Philippines at overweight given
generally positive policy responses.
3Y history
GDP, % yoy 5.0 Q4
PMI, index 45.3 Mar
CPI, % yoy 3.0 Mar
Policy rate, % 4.50 Mar
MSCI Indonesia* -16.0% Q1
EPS, % yoy -16.3 Mar
Trailing P/E 12.4 Mar
Latest 3Y history
GDP, % yoy 6.4 Q4
PMI, index 39.7 Mar
CPI, % yoy 2.5 Mar
Policy rate, % 3.25 Mar
MSCI Philippines* -8.6% Q1
EPS, % yoy 11.6 Mar
Trailing P/E 12.3 Mar
Latest
6
ThailandUnderweight
A steep contraction is expected and while stimulus measures should help, health policy has been weak.
*US$ total return relative to MSCI EM. Source: Bloomberg
Various economic indicators in Thailand had been deteriorating
even before the virus outbreak. The trade-dependent economy is
set to contract in 2020 with COVID-19. Recent private sector
estimates have a median of -3.7%. This would be the worst decline
since 1998, during the Asian Financial Crisis. The key drags will
likely be the severe disruption to global supply chains and the col-
lapse in external demand, as a quarter of Thai exports are destined
for the US and Europe.
The central bank (BoT) estimated that without a policy response
GDP would decline by 5.3% yoy in 2020. As a result, BoT eased
policy, cutting its key rate by 50bps in Q1 to 0.75%. Given that
CPI fell into deflation in March, there is likely room for further
easing. The Bank also eased liquidity pressures by providing
low-interest loans and relaxing debt repayment conditions.
Support has also come from fiscal stimulus worth some 3% of
GDP, with measures including cash handouts and targeted tax
reductions. More stimulus is expected in Q3, with financial mea-
sures set to blunt the impact of the virus.
However, measures to contain COVID-19 have been weak. Strict
travel restrictions were put in place but lockdowns have only
been partial. A state of emergency was only declared at the end of
March, by which time cases had risen by more than tenfold from
10 days earlier. Moreover, testing has been low and rising slowly.
This implies that case numbers may be underreported and could
be one reason that the policy response has been slow thus far.
Market Strategy: MSCI Thailand’s CAPE is just below the his-
torical low, but its trailing P/E premium is close to its long-term
average. We do not believe this is sufficient to compensate for the
lacklustre health response and ongoing virus vulnerabilities, so we
retain our underweight allocation.
IndiaUnderweight
India stands at the beginning of the virus outbreak, but its population and economy are uniquely vulnerable.
*US$ total return relative to MSCI EM. Source: Bloomberg
India’s economy is particularly ill-placed to cope with the fallout of the coronavirus spread. While other economies such as Mexico are growing at a lower headline rate, India’s economy has suffered one of its most severe slowdowns before the outbreak hit. True, PMI readings picked up at the end of the year and into 2020 and industrial production recovered to a 2.1% yoy and 4.5% yoy pace in January and February, respectively. But GDP growth recorded only a lacklustre 4.7% yoy in Q4 2019.
Like many autocratic leaders, PM Modi has been slow to respond to the outbreak, declaring a three-week lockdown only on March 24 when infections had already begun to rise rapidly (although numerous restrictions were already in place). This meant that India found itself in the stage of “community transmission” before it had a chance to implement widespread testing, which runs at one of the lowest rates in EM. As the second-largest country in the world with a population of 1.4 bn, India risks incurring millions of infections as 78 mn people live in slums with poor sanitation and no access to healthcare while hundreds of millions work without formal jobs (Chart 3). What is more, the medical infrastructure is poor as India ranks lowest on hospital beds per inhabitants. And while the population is young with half below the age of 25, pollution and poverty mean that health conditions are poor and large segments of the population are thus nevertheless vulnerable. A rapid spread of the virus amidst such a large population would inevitably also pose risks for the surrounding region and the wider world.
The central bank (RBI) responded by cutting the country’s repo rate by 75bps to 4.4% at an extraordinary meeting, the lowest rate since its introduction. The RBI also cut reserve requirements from 4% to 3%, announced regulatory easing, a moratorium on all loan repayments for three months and injected massive amounts of liquidity into the financial system. It has also increased the limit
3Y history
GDP, % yoy 1.6 Q4
PMI, index 46.7 Mar
CPI, % yoy -0.5 Mar
Policy rate, % 0.75 Mar
MSCI Thailand* -10.2% Q1
EPS, % yoy -20.2 Mar
Trailing P/E 13.0 Mar
Latest 3Y history
GDP, % yoy 4.7 Q4
PMI, index 51.8 Mar
CPI, % yoy 6.6 Feb
Policy rate, % 4.40 Mar
MSCI India* -7.5% Q1
EPS, % yoy -5.0 Mar
Trailing P/E 17.9 Mar
Latest
7
on overdrafts for states by 30% until September, among a raft of other measures.
The finance ministry on March 26 announced a fiscal package of income support measures, valued at approximately 0.8% of GDP. Its key elements are in-kind distributions (food, cooking gas) and cash transfers to lower-income households, insurance coverage for workers in the healthcare sector and wage support to low-wage workers. These measures supplement an earlier announcement made by PM Modi of an additional Rp150 bn for the health sec-tor (0.1 % of GDP). The expenses are part frontloaded, part to be paid from an existing welfare fund and partly financed by an earlier increase in excise taxes.
The measures primarily provide income support, but are pres-ently not designed to stimulate business activity more broadly. Further measures may yet be introduced, but in the short term, the economic fallout is nevertheless likely to be severe. Already in March, the services PMI fell to 49.3 from 57.5 in February, the second-highest decline ever. The manufacturing PMI did not yet fully capture the effect of the lockdown and eased just to 51.8 in March. The eventual economic impact will depend on the extent of contagion in the population, the will and capacity to implement tests and lockdowns and the mitigating policy measures, all of which are highly uncertain. While current market forecasts remain sanguine, a more dramatic deceleration to near-zero growth remains plausible.
Market Strategy: India scores as one of the highest countries on our VVI index and is likely to suffer a severe economic impact from contagion. Its equity market declined 31.1% in Q1, thus underperforming the MSCI EM by 7.5% points. While the sell-off appears dramatic, it outperformed other markets whose economies are arguably less vulnerable. Indeed, India’s P/E of 17.9 is some-what cheap compared to its usual premium relative to the MSCI EM, but on a cyclically adjusted basis, India’s P/E remains above previously achieved lows, unlike many other emerging markets. Given these negatives, we maintain our underweight allocation.
Chart 3: Informal Economy, % of GDP
Source: Medina and Schneider (2019), IMF
Latin America
BrazilNeutral
Brazil is ill-placed to weather the spread of the virus and the economy started the year on a weak footing. Increasingly fractious politics limit reform hopes.
*US$ total return relative to MSCI EM. Source: Bloomberg
Brazil entered this year with considerable market goodwill: it had just passed a landmark pension reform bill saving billions of dollars over the next decade, an achievement that had eluded countless previous administrations. It was about to further its reform drive, engaging on fiscal and administrative reform as well as on granting the central bank formal independence. Yet, improving business sentiment failed to translate into increased activity and growth continued to underperform market expectations. At the same time, the popularity of President Bolsonaro began to weaken. Brazil thus faced the onset of the virus spread on a weak footing: GDP growth recorded a mere 1.7% yoy in Q4 and industrial pro-duction had contracted for several months into year-end. Inflation has remained well-behaved and sharply below target at year-end.
Brazil has been slow in accepting the severity of the health crisis. With President Bolsonaro repeatedly dismissing the threat, mock-ing opponents and mingling deliberately in large groups of people. He went as far as launching an official campaign urging people to carry on with their lives as normal. As a result, several former allies have broken with Bolsonaro, such as the governors of Sao Paulo and Rio de Janeiro state and have introduced their own region-al lockdowns. Other social distancing measures (such as school closures and a prohibition in public events) have also been intro-duced after a rise in street protests against both Congress and the President. Brazil’s economy is particularly vulnerable to the spread of the virus as it has a large informal economy (making shutdown and containment difficult), a high degree of urbanisation (con-tributing to population density, Chart 4) and a poorly developed public health system.
0
10
20
30
40
50
Sout
h A
fric
a
Taiw
an
Bra
zil
Mex
ico
Turk
ey
Rom
ania
Indo
nesi
a
Viet
nam
Mal
aysi
a
Phili
ppin
es
Russ
ia
Thai
land
Indi
a
3Y history
GDP, % yoy 1.7 Q4
PMI, index 48.4 Mar
CPI, % yoy 4.0 Feb
Policy rate, % 3.75 Mar
MSCI Brazil* -26.6% Q1
EPS, % yoy -18.1 Mar
Trailing P/E 10.2 Mar
Latest
8
Economic countermeasures have been put place, even if the scope to do so is more circumscribed than elsewhere. The central bank (BCB) cut the Selic rate by 50bps to 3.75% in March and announced liquidity injections worth up to Brl1.2 trn. It also intervened heavily in the FX market in support of the real, which nevertheless lost 16.4% against the USD during March. It also reduced reserve requirements and opened a facility to provide loans to financial institutions backed by private corporate bonds. Congress is currently considering whether to allow the BCB to purchase bonds in the secondary market.
The government also announced a series of fiscal measures, which include the early payments of social benefits, the deferral of tax payments, an increase in social spending (expanding the Bolsa Familia to over one million additional beneficiaries) and the provision of credit lines to firms to protect employment. It lowered taxes and import levies on essential medical supplies and introduced new transfers to state governments to support higher health spending. The totality of the measures is said to amount to 3.5% of GDP, even if most of this represents reallocations within the 2020 budget. Nevertheless, the government has invoked the escape clause of the constitutional expenditure ceiling to accom-modate additional spending. While implementation constraints could become an issue, the primary deficit is likely to expand by several percentage points of GDP this year.
Nevertheless, the economic impact will likely be felt sharply and the first indicators paint a bleak picture: the services PMI plunged to 34.5 in March and overall growth is likely to contract for the year.
Market Strategy: Brazil has been one of the most severely affect-ed markets during Q1, underperforming the MSCI EM by 27% points. This reflects the country’s vulnerability to the virus, its exposure to commodity prices, close relationship with China and the deteriorating political climate, which bodes ill for the reform outlook. While a current P/E of 10.2 represents a sharp adjust-ment, in cyclically adjusted P/E terms, Brazil has cheapened less than other, more robust EM economies. Given that Brazil fares poorly in our four-factor framework, we maintain our allocation at neutral.
Chart 4: Urban Population, % of Total Population
Source: World Bank
MexicoNeutral
Starting the year on a weak growth footing and with a delayed response to the virus outbreak, the economy is highly vulnerable.
*US$ total return relative to MSCI EM. Source: Bloomberg
Mexico started the year with one of the weakest levels of activity in the EM space as activity failed to pick up meaningfully in spite of the renewed trade treaty with the US and the demand recovery in its northern neighbour. Indeed, GDP contracted 0.5% yoy in Q4 following a 0.3% contraction in Q3. Expectations had built that manufacturing activity and exports could recover following the end of last year’s auto sector strikes and that oil production would stabilize given the government’s expansion policy. However, both manufacturing reading and industrial production overall have con-tinued to contract on an annual basis during the three months up to and including February.
In parallel with his Brazilian counterpart, President López Obrador (AMLO) has been in acute denial of the severity of COVID-19, dismissing all warnings and urging the population to carry on life as normal. More worryingly, Mexico has the lowest level of hospital beds in the OECD (Chart 5) and was already suffering a shortage of medicines before coronavirus. It stands at the low end of testing compared to other countries and accordingly scores as one of the most vulnerable countries in our proprietary Virus Vulnerability Index. AMLO belatedly announced a set of piece-meal distancing measures, but it remains questionable how well they can be implemented given the structure of Mexico’s economy which contains a large informal sector and has almost 50% of the population living below the poverty line. Unsurprisingly, March activity data already pointed to a sharp slump: manufacturing PMI dropped to 45 and the more important services index slumped to 34.9, a record low. While the government previously assumed a 1.5-2.5% expansion in 2020, it now appears that Mexico is headed for a contraction at least as severe as that experienced during the 1994/95 Tequila crisis or the GFC.
0
20
40
60
80
100
Indi
a
Viet
nam
Phili
ppin
es
Thai
land
Rom
ania
Indo
nesi
a
Sout
h A
fric
a
Russ
ia
Turk
ey
Mal
aysi
a
Taiw
an
Mex
ico
Bra
zil
3Y history
GDP, % yoy -0.5 Q4
PMI, index 47.9 Mar
CPI, % yoy 3.7 Feb
Policy rate, % 6.50 Mar
MSCI Mexico* -11.9% Q1
EPS, % yoy -2.1 Mar
Trailing P/E 10.5 Mar
Latest
9
Against the backdrop of weak US demand, Mexico’s looming recession could well last as business sentiment and investment activity could be permanently damaged from AMLO’s recent decision to uphold the results of a people’s poll that called for the cancellation of a $1.4bn Constellation Brands brewery in Mexicali, which is already two-thirds built.
The President has announced a series of lacklustre initiatives to dampen the economic fallout of the health crisis, including increased social transfers, subsidies and credit for small- and medium-sized enterprises. However, the emphasis remains on the pre-existing plans to boost infrastructure spending and the announced measures are widely deemed to be insufficient to fore-stall a deep recession. The government has already made changes to the Fiscal Responsibility Law in order to allow it to tap addi-tional resources, but it has also had to abandon its primary surplus target. A large fiscal deficit will likely force the government to increase its public debt, something AMLO had famously promised not to and which is likely to trigger a ratings downgrade from the current A3/BBB.
In response to these developments, Banco de Mexico decided to cut its reference rate by 50bps to 6.5% in an extraordinary meet-ing. It is likely to ease further as economic conditions deteriorate but it stressed that the policy rate was near neutral and that fiscal and health policies would be more effective tools in this crisis. Inflation remains muted for now, at 3.7% yoy in February. It will likely be depressed by a widening negative output gap and the decline in commodity prices. A sharp depreciation of the peso by up to 27% (partly reversed since), may counteract these dynamics somewhat.
Market Strategy: Mexico lost 35.5% during the past quarter, underperforming the MSCI EM by 11.9% points. This has taken the market’s P/E to 10.5, significantly cheaper than historical standards. However, on a cyclically-adjusted basis, the case is more mixed and unlike other markets, Mexico’s CAPE sits above its long-term low. With valuations thus less compelling than else-where, where either the adjustment has been greater or the out-look better, we maintain a neutral allocation to Mexico.
Chart 5: Hospital Beds, Per 1,000 Inhabitants
Source: World Bank
Emerging Europe and Africa
RussiaOverweight
The Russian economy was on the road to recovery but is now subjected to two simultaneous shocks.
*US$ total return relative to MSCI EM. Source: Bloomberg
Russia entered the outbreak of the crisis with different dynamics than other economies. First, GDP growth had accelerated to 2.1% yoy in Q4. Second, it has ample fiscal resources to dampen the eco-nomic impact of the outbreak. Yet, it faces a second economic shock in the form of the oil price conflict with Saudi Arabia and the US.
President Putin did not initially dismiss the threat of the virus like other autocrats, but claimed that it had been brought “under control”. Indeed, early closing of international travel led to a slow initial rise of infections, even if the reliability of official figures may be questionable. This was followed up by the announcement on March 30 of a week-long (paid) “national holiday,” which was later extended until end-April. Russia is somewhat better placed than other EM countries with its better medical infrastructure and higher testing rate. However, the President later stepped back from the frontline, leaving critical lockdown decisions to mayors and regional governors.
Having eased the policy rate by a total 150bps in 2019, the CBR cut by 25bps in February. It adopted several other measures, albeit it on a small scale: it provided regulatory forbearance and created new financing facilities to support SMEs, households, and financial institutions. The government adopted a slew of fiscal measures to support incomes, ease the loan burdens of SMEs and defer taxes. They are said to amount to 1.4% of GDP, but repre-sent mostly reallocations of already planned expenditures. Indeed, the slump in the oil price is likely to lead to a large fiscal deficit in 2020, limiting the room for manoeuver.
Market Strategy: Despite the double shock to its economy, Russia is better placed than many peers to withstand them (e.g. breakeven oil price of $40/brl vs $80/brl for Saudi Arabia). We maintain our overweight allocation as diversification in case oil prices recover, despite CAPE-based valuations being relatively less favourable.
0
2
4
6
8
10
Indi
a
Phili
ppin
es
Indo
nesi
a
Mex
ico
Mal
aysi
a
Thai
land
Bra
zil
Viet
nam
Sout
h A
fric
a
Turk
ey
Rom
ania
Taiw
an
Russ
ia
3Y history
GDP, % yoy 2.1 Q4
PMI, index 47.5 Mar
CPI, % yoy 2.5 Mar
Policy rate, % 6.00 Mar
MSCI Russia* -12.8% Q1
EPS, % yoy -3.8 Mar
Trailing P/E 4.2 Mar
Latest
10
TurkeyNeutral (↑)
The economic recovery and a relatively stronger health sys-tem currently support the outlook.
*US$ total return relative to MSCI EM. Source: Bloomberg
Turkey probably entered the year strongest amongst EMs, as it had made a swift recovery following its recession. After contract-ing for four consecutive quarters, it grew by 0.9% yoy in Q3, accel-erating to 6.0% yoy in Q4 (full-year growth 0.9%). This reflected a rebound in private consumption on the back of the credit impulse provided by the government. In the present environment, Turkey benefits from its large internal market, a low export ratio and, as an oil importer, also from currently low oil prices.
Like other autocrats, President Erdogan at first refused to impose a full nationwide lockdown, insisting that the economy had to “keep turning under every circumstance.” The government did shut down schools and universities though and imposed travel restrictions as well as a ban on leaving home for those aged over 65. But the President’s insistence on “voluntary quarantine” has led to a more rapid increase in infections and fatalities than in Italy or Spain. After a 48-hour lockdown was eventually imposed, the attempted resignation by Interior Minister Soylu exposed a rift within the government. While testing frequency in Turkey has improved, this came at a late stage. On the other hand, the country benefits from an improved health system and a young population.
The central bank responded by cutting its key policy rate by 100bps to 9.75% and introduced a series of liquidity measures. The government announced a package of measures, estimated at 2% of GDP, including the postponement of tax payments, tempo-rary tax cuts, temporary easing in lending conditions and one-off payments such as an increase in minimum pensions and cash assis-tance to families in need.
Market Strategy: Turkey is in a stronger cyclical position than other EMs and despite a sharp rise in infections relatively better placed during the outbreak. Its valuation metrics have dropped to record lows and as a result we upgrade our allocation to neutral.
RomaniaNeutral (↓)
A GDP contraction is likely this year, but robust testing is pos-itive for countering the COVID-19 outbreak.
*US$ total return relative to MSCI EM. Source: Bloomberg
Romania’s growth had been decent prior to COVID-19 but now the pandemic may lead to an economic recession in 2020. Manufacturing (20% of GDP) is set to weigh on activity, with a number of companies including Ford and Renault halting pro-duction at plants in the country. This is likely to halt real wage growth (5.0% yoy in January), which has been a key support for household consumption (62% of GDP) and GDP growth in recent years. Hence, recent consensus expectations are for a 3.5% yoy contraction in GDP. This compares to a 7.1% fall during the GFC and given the severe disruption from COVID-19, downside risks to current estimates remain.
Monetary and fiscal measures have been underwhelming. The central bank (NBR) cut its key policy rate by 50bps to 2.0% and has implemented quantitative easing. A fiscal stimulus worth 2% of GDP has been announced, including support for businesses and partial wage payments. However, room for further monetary and fiscal stimulus is limited as interest rates are low and the budget deficit was already wider than the EU limit of 3% of GDP in 2019. Rising debt levels also risk a downgrade of Romania’s sovereign rating (BBB-) to non-investment grade.
COVID-19 cases rose nearly tenfold in the two weeks to April 5. A national state of emergency was declared in March and extended through end-April, while measures like social distancing and travel restrictions have been implemented. Romania’s testing levels have risen impressively over the period, from 427 per million inhabi-tants to 2,113 and above the likes of Malaysia and Taiwan. This is likely to help Romania more effectively contain the COVID-19 outbreak.
Market Strategy: MSCI Romania’s trailing P/E discount to EM is 1.1 standard deviations below the five-year average. We do not believe this is sufficient compensation for a potentially severe downturn, so we reduce our allocation to neutral.
3Y history
GDP, % yoy 6.0 Q4
PMI, index 48.1 Mar
CPI, % yoy 11.9 Mar
Policy rate, % 9.75 Mar
MSCI Turkey* -6.4% Q1
EPS, % yoy -28.7 Mar
Trailing P/E 7.3 Mar
Latest 3Y history
GDP, % yoy 4.3 Q4
CPI, % yoy 3.1 Feb
Policy rate, % 2.00 Feb
MSCI Romania* -7.2% Q1
EPS, % yoy 13.1 Mar
Trailing P/E 12.6 Mar
Latest
11
Saudi ArabiaUnderweight
The Kingdom faces the dual headwinds of a collapse in the oil price and rising COVID-19 cases.
*US$ total return relative to MSCI EM. **Tadawul All Share Index. Source: Bloomberg
Saudi Arabia’s economy faces two serious shocks this year, one
external (COVID-19) and one self-inflicted. The latter is the oil
price collapse, which was partly caused by OPEC+ not agreeing
to extend output cuts amid disagreement over how much to cut
output by. Saudi favoured more aggressive cuts whereas Russia
did not. It then declared a price war. Effectively, the Kingdom was
attempting to gain market share and has reduced its selling prices
significantly. This, along with the demand shock from COVID-
19, helped push the price of Brent crude below $23/barrel for the
first time since 2002. This is well below Saudi’s budget breakeven
price of $80.
COVID-19 is likely to raise this breakeven price further, as the
government announced a stimulus package amounting to 2.7% of
GDP in March to counter the impact of the virus. The net impact
on the budget is likely to be smaller though as the government
said it would cut spending on non-priority items by 1.9% of GDP
in 2020. The Saudi Arabian Monetary Authority cut its policy
rates by 50-100bps and is providing support for the private sector
worth 1.9% of GDP, including funding for banks to boost lending.
COVID-19 cases rose tenfold in the two weeks to April 1.
However, various measures are likely to flatten the curve of new
cases. These include travel restrictions, 24-hour curfews in Mecca
and Medina, the suspension of prayers at mosques and the closure
of various places like shopping malls and schools.
Market Strategy: MSCI Saudi Arabia’s trailing P/E premium
over EM is just above the five-year average. Given the dual severe
headwinds of the oil price collapse and COVID-19, we are com-
fortable maintaining our underweight allocation.
South AfricaNeutral (↑)
A sharp fall in activity and a credit rating downgrade contrast with a strong health response to COVID-19.
*US$ total return relative to MSCI EM. Source: Bloomberg
South Africa faced anaemic growth prospects in 2020 prior to the
onset of COVID-19, which is set to tip the country into recession.
Consensus estimates a 2.3% yoy GDP contraction for this year,
which would be the worst fall on record. This has led the central
bank to cut its key policy rate by 100bps this year to 5.25% and to
start its first quantitative easing program.
Fiscal space is constrained, which may be why stimulus has been
limited to targeted measures including helping struggling busi-
nesses and households. South Africa’s foreign currency debt rating
was downgraded to non-investment grade (Ba1) by Moody’s in
March, with the ‘negative’ outlook maintained due to the impact
of COVID-19. All three major rating agencies have now assigned
the country a sub-investment grade rating. This means that South
Africa will drop out of FTSE’s World Government Bond Index at
the end of April, likely prompting capital outflows.
The first case of COVID-19 was confirmed on March 1, with cases
rising to 1,353 by month-end. South Africa has a young popula-
tion with only 5% over 65, potentially making it less vulnerable
overall. Testing for the virus has gone up markedly and this should
help guide policies to contain the virus. A nationwide lockdown is
also in place.
Market strategy: MSCI South Africa’s valuations are cheap. Its
CAPE is 10% below the previously-achieved low, while the P/E
premium over EM is 1.5 standard deviations below the five-year
average. A strong health policy response should help contain
COVID-19, which may enable a quicker recovery. These factors
are sufficient to make us raise our allocation to neutral.
The information contained herein is obtained from sources believed by City of London Investment Management Company Limited to be accurate and reliable. No responsibility can be accepted under any circumstances for errors of fact or omission. Any forward looking statements or forecasts are based on assumptions and actual results may vary from any such statements.
3Y history
GDP, % yoy 0.3 Q4
PMI, index 42.4 Mar
CPI, % yoy -0.5 Dec
Policy rate, % 1.00 Mar
MSCI Saudi Arabia* -0.4% Q1
EPS, % yoy** 8.5 Mar
Trailing P/E 14.4 Mar
Latest 3Y history
GDP, % yoy -0.5 Q4
PMI, index 44.5 Mar
CPI, % yoy 4.6 Feb
Policy rate, % 5.25 Mar
MSCI South Africa* -16.7% Q1
EPS, % yoy -7.0 Mar
Trailing P/E 12.1 Mar
Latest
CITY OF LONDONInvestment Management Company Limited
Contacts
Macroeconomic Analysis
Michael Hart, London OfficePhone: 011 44 207 711 1558 E-Mail: [email protected]
Lyndon Barreto, CFA, London OfficePhone: 011 44 207 711 1551 E-Mail: [email protected]
Mike Liu, CFA, London OfficePhone: 011 44 207 860 8318 E-Mail: [email protected]
London Office77 Gracechurch Street London EC3V 0AS United KingdomPhone: 011 44 20 7711 0771 Fax: 011 44 20 7711 0774 E-Mail: [email protected]
Philadelphia OfficeThe Barn, 1125 Airport Road Coatesville, PA 19320 United StatesPhone: 610 380 2110 Fax: 610 380 2116 E-Mail: [email protected]
Seattle OfficePlaza Center 10900 NE 8th Street, Suite 1414 Bellevue, WA 98004 United StatesPhone: 206 830 9986
Singapore Office20 Collyer Quay 10-04 Singapore 049319Phone: 011 65 6236 9136 Fax: 011 65 6532 3997
Dubai OfficeUnit 2, 2nd Floor The Gate Village Building 1 Dubai International Financial Centre P.O. Box 506695, Dubai, United Arab EmiratesPhone: 011 971 4 249 8402 Fax: 011 971 4 437 0510
Websitewww.citlon.co.uk
Important NoticeCity of London Investment Management Company Limited is authorised and regulated in the UK by the Financial Conduct Authority, registered as an Investment Advisor with the United States Securities and Exchange Commission and regulated by the Dubai Financial Services Authority.While City of London Investment Management Company Limited has used reasonable care to obtain information from reliable sources, no representations or warranties are made as to the accuracy, reliability or completeness of third party information presented herein. No responsibility can be accepted under any circumstances for errors of fact or omission. Some of the information in this document may contain pro-jections or other forward looking statements regard-ing future events or future financial performance of countries, markets or companies. These statements are only predictions as of the date of this document which could change without notice and actual events or results may differ.This document does not constitute an offer to sell or the solicitation of an offer to buy any securities. Nothing herein should be construed as investment advice to buy or sell any securities. Past performance is not a guide to future results. The value of an investment and any income from it can go down as well as up and investors may not get back the original amount invested.
Overweight Neutral Underweight
M
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uc
Not
e: A
ll d
ata
sho
wn
are
as
at
31 M
arc
h 2020 u
nle
ss s
tate
d o
ther
wis
e. U
C i
s u
nch
an
ged
(cu
rren
cy v
ersu
s U
S d
olla
r).
S&P
sov
erei
gn r
ati
ng
show
n i
s lo
ng-
term
for
eign
cu
rren
cy r
ati
ng.
Da
ta f
or c
oun
trie
s in
the
Mid
dle
Ea
st a
nd
Nor
th A
fric
a r
egio
n a
re
the
late
st a
vail
abl
e, b
ut
in c
erta
in c
ase
s re
late
to
peri
ods
mor
e th
an
on
e ye
ar
ago
. T
he 3
4 c
oun
trie
s sh
own
in
the
ta
ble
acc
oun
ted
for
99
.1%
of
the
S&P
/EM
Fro
nti
er S
upe
r C
ompo
site
BM
I on
31
Ma
rch
20
20
. A
n a
dd
itio
na
l 2
2 c
oun
trie
s a
ccou
nte
d f
or t
he
rem
ain
ing
0.9
% o
f th
e in
dex
on
the
sa
me
da
te.
The
se c
oun
trie
s, w
hich
ca
n b
e a
cces
sed
via
Cit
y of
Lon
don
’s F
ron
tier
Ma
rket
s st
rate
gy,
are
: B
an
gla
des
h, B
otsw
an
a,
Bu
lga
ria
, C
ote
d’I
voir
e, C
roa
tia
, C
ypru
s, E
cua
dor
, E
ston
ia,
Gha
na
, Ja
ma
ica
, K
aza
khst
an
, L
atv
ia,
Leb
an
on,
Lit
hua
nia
, M
au
riti
us,
Na
mib
ia,
Pa
na
ma
, Sl
ova
kia
, T
rin
ida
d &
Tob
ago
, T
un
isia
, U
kra
ine
an
d Z
am
bia
.†
An
y fo
reca
sts
are
ba
sed
on
Blo
ombe
rg c
onse
nsu
s fo
reca
sts,
whe
re a
vail
abl
e, a
nd
ass
um
ptio
ns.
Act
ua
l re
sult
s m
ay
vary
fro
m a
ny
such
sta
tem
ents
or
fore
cast
s. P
ast
per
form
an
ce i
s n
o gu
ara
nte
e of
fu
ture
res
ult
s.
*K
ey C
rite
ria
Sou
rce:
Blo
ombe
rg,
Cit
y of
Lon
don
In
vest
men
t M
an
age
men
t
KE
Y E
CO
NO
MIC
AN
D F
INA
NC
IAL
IND
ICA
TO
RS