Emerging markets will recover in 2019 as external factors stabilize: StanChart
India, a major oil importer, has suffered economic setbacks this year with an extremely weak Indian rupee and significant trade shocks.
“A stable or softer dollar, and stable or lower oil prices, will be a significant net positive for India as it takes the pressure off RBI (Reserve Bank of India) to continue to hike rates. We think that gets deferred to next year,” said Robertson. “No one wants to see political uncertainty or upheaval in India … but external factors should help mitigate that.”
While emerging markets such as Turkey, Brazil and Pakistan have their own internal political problems, the U.S.-China trade dispute has added pressure to supply chain woes for countries like Malaysia.
Malaysia faces external trade concerns and weak exports, and China is one of its largest trading partners.
“There are some concerns about fiscal sustainability (in Malaysia),” said Robertson. “But in an environment where the external factors are stable, or neutral, or maybe slightly better, I think rating agencies will give the new administration the benefit of the doubt.”
If trade tensions continue, regardless of what is achieved at the G-20 summit, the equity markets in North Asia, such as Korea and Taiwan, will underperform, said Robertson. But for countries such as India and Indonesia, his theme is “overweight.”