Hooper adds: "In terms of the larger economy, the official July manufacturing PMI fell disappointingly to 49.0 from 50.2 in the prior month, though the good news is that non-manufacturing remains elevated at 53.8.7
"The weak manufacturing PMI indicates that the recent reopening-related economic recovery has started to falter, likely due to amplified property market woes and new pockets of Covid infections. Policymakers are likely to roll out further infrastructure stimulus to combat growth headwinds (as well as specifically supporting the property sector).”
Jane says that investors should strip China out of the wider emerging markets universe, and says it may be that the country is now “uninvestable.” He says that political and other factors mean the drivers of the Chinese stock market are not the same as the drivers of other emerging markets.
He adds: “I would draw the distinction between China, which dominates the indices, and other markets such as India, south east Asia, LatAm and South Africa. These all have arguably very different drivers nowadays. We avoid China on the global decoupling and residential property disaster, particularly China might become uninvestable on political grounds”
Inflation
Emerging market economies are particularly vulnerable to inflation, especially as their currencies tend to be weaker than the dollar, and most commodities in the world are priced in the US currency.
Therefore a stronger US currency is likely to have a disproportionately large impact on emerging economies, and is one of the reasons why food shortages have caused political strife in countries such as Sri Lanka, demonstrating that the impact of the stronger dollar can have long-term impacts.
David Thorpe is special projects editor of FTAdviser
