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Will Emerging Markets Be Able to Make a Comeback in 2023 After Having a Rough Ride in 2022?

2022-12-17  Maliyah Mah

If you think that the stock market in the United States had a rough year, spare a thought for the developing world. The benchmark MSCI Emerging Markets Index has dropped by forty percent since it reached its all-time high in 2021.

Rough Ride

Is it possible to stop the slaughter?

In addition to more conventional indicators, such as a company's earnings, the answer is contingent on a plethora of complicated geopolitical concerns. Is it possible for China, which makes up almost a third of some emerging market indices, to recover from the limits imposed by the pandemic and get growth back on track? Will the value of the U.S. dollar continue to climb, so pushing up the costs of imports for economies that rely heavily on commodities? Will there finally be peace in Ukraine, allowing Russia to resume its previous role as a participant in international trade?

To begin, some encouraging data: Emerging Market (EM) corporations have debt-to-equity ratios that are only 1.5 times profits, which is far lower than their rivals in established markets. The MSCI EM Index trades at a multiple of approximately 10 times projected earnings forecasts, whereas the S&P 500 trades at a multiple of 17 times.
In addition, a stronger dollar will aid exporters of commodities, as most commodity prices are quoted in dollars. This will be beneficial to them.

Continue reading for more snapshots of important emerging market economies.

In a statement to investors that was sent out in October, Lazard Asset Management stated that "Valuations continue to be attractive compared to history and developed markets." There has been an increase in profitability, free cash flow, and dividend yields, and it is anticipated that earnings growth will begin to rebound in 2023.


  • After a challenging year marked by high levels of geopolitical and economic uncertainty, some analysts anticipate that attractively valued developing markets could have a resurgence in the year 2023.
  • The Organization for Economic Cooperation and Development (OECD) anticipates that growth in China would quicken as a result of the government's moderation of COVID policies and its adoption of supportive fiscal policy.
  • Even if the rate of growth in India is forecast to decelerate, the country is still on course to have the second-fastest expanding economy among the G20.
  • It is anticipated that Brazil and South Africa will face the negative effects of the stabilization of commodity prices.
  • It's possible that the weight of the war in Ukraine will continue to put pressure on the Russian economy.


  • Renminbi is the currency in use.
  • The Shanghai Composite Index serves as the primary stock benchmark (SSE)
  • Growth of the economy is projected to be 3.3% in 2022.
  • 4.6% annual growth in the economy is anticipated for 2023.

Due to the fact that China is responsible for roughly one-third of the total market capitalization of many emerging market indices, it played a significant part in this year's decrease in the value of EM assets. This indicates that the policies of Beijing play a disproportionately large effect, and as of late, such policies have been unfavorable to markets.

The zero-COVID policy that China implemented resulted in repeated lockdowns, often of entire cities on little notice, which disrupted the country's economic growth.

The month of November marked the beginning of widespread protests, which added to the uncertainty that investors try to avoid.

Add to that China's crackdown on its foreign-investor darling technology stocks, as well as restrictions on homeowners' ability to restructure debt in the midst of a growing property crisis, and the result is a mix that has weighed on the once seemingly unstoppable economic growth trajectory of the nation.

This year, the benchmark Shanghai Composite Index had a decline of almost 15%, going from 3,600 in January to approximately 3,000 by the end of November.

Having said that, perhaps the following year will go better.

According to a recent research note published by Morgan Stanley, China is likely to adjust its policy priorities to place a greater emphasis on the economy. The firm even predicted that zero-COVID will be discontinued by April 2023. A complete reopening would result in an increase in domestic consumption, which would contribute significantly to the improvement of the economy. Since inflation is rising in other countries, Beijing is not constrained in its ability to stimulate the economy as much as it would like to be.

Only in the third quarter did the government inject over 146 billion dollars worth of stimulus spending into the economy, bringing the total to about 1 trillion renminbi.

People who buy homes in China are typically long-term owners; as a result, they are less likely to sell their homes than people who acquire homes for the purpose of investment, which would put additional downward pressure on property values. Beijing has demonstrated that it is willing to save the financially struggling property developers in China, despite the fact that the situation is unique for them.

This helps to explain why the OECD increased its growth prediction for China to 4.6% for the year following next year, up from 3.3% for the year 2022.


  • The Real Currency:
  • Main Stock Benchmark: Bolsa de Valore's de São Paulo (BOVESPA)
  • It is anticipated that the economy would rise by 2.8% in 2022.
  • 1.2% annual increase in the economy is anticipated for 2023.

    Is it the correct time to invest in Brazil now that the pro-business president Jair Bolsonaro has been removed from office and replaced by Luis Inácio Lula da Silva, who leans more toward socialism?

Da Silva is going to have to make some tough decisions on the economy since he is going to inherit a number of problems. In addition to a plethora of other spending initiatives, his predecessor, Bolsonaro, instituted fuel subsidies in order to mitigate the negative effects of rising prices that were caused by Russia's invasion of Ukraine.

Continuing with these expenditures might put the value of the real at risk, whereas cutting them out could cause the economy to slow down and lead to an increase in price levels.

The positive news is that the nation's primary exports, which include commodities, have seen their prices increase, which has contributed to the nation's expected annual economic growth of 2.8% this year.

Since reaching a low point in July 2022, the benchmark Bove spa has gained 14%.

The economic policies proposed by Da Silva include the use of public banks to stimulate the economy, the gradual or complete halting of the privatization of state-owned enterprises, and a larger role for the government in the management and regulation of the economy. The OECD predicts that growth will decelerate to just 1.2% in 2019 as a result of a number of factors, including the fact that concerns about a global recession have caused commodity prices to begin to fall in tandem with exports.

Russia's Federal Government

  • Money: the Russian Ruble
  • Main Stock Benchmark: Index Mosbirzhi (MOEX)
  • It is anticipated that the economy would increase by 5.5% in 2022.
  • Growth in the economy is expected to be (4.5%) in 2023.

    When Russia invaded Ukraine in February 2022 and the West retaliated with widespread sanctions and an exodus of firms, Russia effectively removed itself from the global economy. This caused the West to respond by isolating Russia economically. At the beginning of November, the United States The United States Department of Commerce has given Russia the status of a "non-market economy," citing "the increase of Russian state-influence in the economy" as the reason for the decision.

It is anticipated that the gross domestic product will decrease in both 2022 and 2023 as a direct result of the significant reallocation of resources to support the war effort.

Even the Russian stock market has been hit hard recently. The benchmark MOEX index had a value of 4,150 in October 2021, but it had dropped over half of that value by July 2022. Since then, the value of the index has stayed relatively unchanged.

It is unlikely that the struggling Russian economy would experience much of an uptick in 2023 given that Russian President Vladimir Putin is showing no indications of backing down from his conflict against Ukraine.


  • Money: Indian Rupee
  • Main Stock Benchmark: Stock Exchange Sensitive Index (Sensex)
  • The growth of the economy is projected to be 6.6% in 2022.
  • 5.7% annual growth in the economy is anticipated for 2023.

    The epidemic had a significant impact on the economy of India; nevertheless, the country was able to recover rather rapidly and was experiencing double-digit growth by the end of 2021. At about the middle of the year 2022, growth came to a standstill as a result of adverse weather conditions, particularly in the agriculture sector. As the cost of basic necessities such as food and electricity increased, consumers grew more cautious about spending money on non-essential items, further reducing demand.

A weakening rupee, which makes imports more expensive when measured in terms of the country's own currency, contributed to the widening of India's current account deficit during the July–September quarter, which reached 2.9% of the country's gross domestic product (GDP). This deficit was made worse by an increase in India's monthly energy and food import bill. The main reason that India's headline inflation is running higher than the Reserve Bank of India's objective of 6% is that food prices have increased. In India, the cost of food makes up a bigger portion of the calculation for the consumer price index than it does in any other G20 nation.

In spite of the obstacles, the Organization for Economic Cooperation and Development (OECD) forecasts that India will have the second-fastest growing economy among the G20 in the fiscal year 2023 thanks to a reduction in its current account deficit, likely a reduction in government spending, and an ease in imported inflation.

From just under 60,000 in January 2022, the Sensex has increased to just under 63,000 in December 2022, representing a gain of around 5%.

Africa, South

  • Money: South African Rand
  • The FTSE/JSE All Share Index is the Primary Stock Benchmark.
  • The growth of the economy is projected to be 1.7% in 2022.
  • 1.1% annual increase in the economy is anticipated for 2023.

    Early in 2022, South Africa's economy began to return to the growth levels it had experienced before to the epidemic. This was largely due to rising household consumption as well as a larger demand for commodities exports. Then, progress came to a standstill as spring floods in the KwaZulu-Natal region forced manufacturers to close their doors, and the nation's old fleet of coal-fired power plants caused widespread electrical outages that were detrimental to the mining, manufacturing, and even agricultural industries.

    Confidence in the business world plummeted.

After beginning the year at approximately 73,750, the FTSE/JSE All Share Index dropped by approximately 14% to reach 65,000 in the month of June, shortly after the floods.

As a result of the conflict in Ukraine, more coal was shipped to Europe, which was one positive development.

On the other hand, analysts anticipate a decline in the prices of commodities in 2023. In light of these circumstances, the Organization for Economic Cooperation and Development (OECD) forecasts that the meagre growth rate of 1.7% in 2022 will decline to just 1.1% in 2023.
Things could be much worse. The OECD anticipates a comeback in private spending as well as an increase in private investment as businesses replace aged capital equipment. There may be fewer power outages as a result of the planned split of the national power provider, which will open the door for new competitors to enter the market. A recovery in the international tourism industry would bring about additional alleviation.

2022-12-17  Maliyah Mah