There is considerable debate whether to “buy the dip” or not as financial markets react to the coronavirus outbreak.
Amundi Asset Management, Europe’s largest fund manager with €1.45 trillion ($1.6 trillion) in assets under management, is taking it one step further, and saying it sees opportunities in emerging market equities.
“Unless the ‘elevated uncertainty’ is able to derail the global economy into a shock—which is not our scenario now—excessive downward setbacks in prices could provide entry points for asset classes with attractive valuations and good fundamentals. In particular, we see selective opportunities in EM [emerging market] equity given the reacceleration of earnings growth, attractive valuations and the prospect of a weaker U.S. dollar DXY, -0.22%. The short-term issue due to the Chinese situation is an opportunity to add to this asset class, barring any disruption to the global outlook,” said Pascal Blanqué, Amundi’s chief investment officer.
In particular, the firm is recommending emerging markets that are relatively insulated from the virus and can benefit from either strong domestic demand or the continuing shift in the value chain.
“For example, we expect strong growth to remain in Vietnam, activity to slightly rebound in Indonesia and, the Singapore economy to benefit from stabilization and the eventual pickup of industrial production and global trade,” he wrote. On China, Amundi recommended being more cautious on vulnerable sectors such as hospitality and aviation, as well as tourism-related companies sensitive to Chinese demand.
This article originally appeared on MarketWatch.
