An Active Investor’s Guide To Emerging Markets Stocks

Emerging markets (EMs) are a big, heterogeneous universe of economies and markets that can be subject to big volatility. They also are a large and fertile hunting ground for investment opportunities. Stock picker Emily Fletcher offers a grand tour of the “wild” EM equity landscape.

Emerging markets (EMs) have earned more mentions this year as their central banks were quicker than developed market peers to raise interest rates post-pandemic. This helped them to put a lid on inflation sooner in an effort to rebalance and set their economies up for growth. The opportunities in EMs are many, but the universe is vast and the risks can be significant.

Emily Fletcher, an emerging markets portfolio manager within BlackRock Fundamental Equities recently joined The Bid podcast to offer her observations as an investor who is meeting with companies and handpicking stocks across the world’s developing economies. We offer excerpts of that conversation here.

What’s the difference between developed and emerging markets?

The definition of emerging markets is all about the level of development of the stock market. Those that have the most developed systems in place are classified as developed markets, and those with less comprehensive trading systems are classified as emerging markets.

In terms of what really sets apart emerging markets from developed markets, I think it’s the complexity, the volatility, and the dispersion that we see across the universe.

In terms of complexity, we’re talking about 25 countries, each with its own political and economic cycles. They all have their own currency and bond markets. In aggregate, the markets trade for 20-plus hours a day over six days a week, whereas developed markets tend to have harmonized economic cycles.