The emerging markets narrative in 2017 can be summed up as “much less stress and profit recovery,” Langridge stressed.
This is a remarkable feat, considering the asset class was predicted to be in deep water after Donald Trump’s surprise victory in the US election.
“It has been a remarkably benign world so far this year with remarkably few shocks and those shocks haven’t occurred in the principle areas that hurt EM,” explained the senior managing director and senior portfolio manager.
Tentative action from the Federal Reserve, a weaker dollar have all been to the benefit of EM stocks.
Even falling commodity prices have only touched those countries that have a direct link to the sector, Langridge pointed out.
However, if there is a repeat sell-off of the FANG stocks, comprised of American tech heavyweights Facebook, Amazon, Netflix and Google, the emerging economies could be in a world of pain, she warned.
“There is one clear source of valuations risk that could impact the momentum in global stock markets, and that is centred in the US around the so-called FANGs.
“IT is one of the biggest sectors in the EM class. It has also performed extremely well this year for very strong reasons relating to their profitability.
“But a lot of it is also indirectly a function of momentum and investment excitement in the FANGs.
“So, if you see an abrupt reversal in that sector in the US, the first signs of which we saw last week, you will see that ricochet effect in the related sectors in EM.”
