We don’t support this browser anymore.
This means our website may not look and work as you would expect. Read more about browsers and how to update them here.

Skip to main content
  • Register
  • Help
  • Contact us

Asia & emerging markets review – an unpredictable year so far

We reflect on an eventful year so far for Asian and emerging markets, how economies and stock markets have been holding up, and what investing styles have held up best.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Economies across the globe have recently had to contend with an entirely unpredictable combination of factors – geopolitical war, a surge in inflation, rising commodity prices, and a pandemic.

This put pressure on governments to support people and businesses, and central banks to help stabilise their economies. It also created huge amounts of uncertainty for investors.

In this quarterly Asian and emerging markets sector review, we reflect on an eventful year so far and how different economies and stock markets have performed.

This article isn’t personal advice. If you’re not sure whether an investment is right for you, ask for financial advice.

An unpredictable year

Russia’s full-scale military invasion of Ukraine has been the year’s biggest news event. It’s had a devastating impact, with civilian casualties mounting and millions of Ukrainians fleeing the country for refuge.

The human impact of this war matters most, though in this review we focus on the investment and wider economic backdrop.

Measures have been introduced by countries across the globe to hinder Russia’s economy in the hope it could end the war. For instance, the US has banned all Russian oil and gas imports, while the UK will phase out oil imports by the end of this year. Western countries have also frozen the assets of Russia’s central bank, to stop it using currency reserves, leading to weakness in the Russian rouble and rising inflation.

Restricting oil and gas imports from Russia has contributed to rising energy and commodity prices. However, economies that export more commodities, like Latin America, could benefit from this trend. Not only is the region a metals and energy producer, but it also has lower exposure to gas markets. Agricultural exporters, including Uruguay, Brazil, and Argentina, could also fill in for some lost food supply from Ukraine.

Latin America has a history of high inflation, so its central banks have tried to be on the front foot. For example, Brazil’s central bank recently raised its interest rate to 12.75% in an effort to stem inflation. Inflation could still present challenges though, especially as the country has a large low income and working-class population.

Ultimately, it’s impossible to know when the war will end and how financial markets will react. That said, it’s likely global economies will remain under pressure and rethink how business is carried out in some sectors.

Elsewhere in China, a surge in Covid-19 infections has triggered lockdowns in several major cities, including Shanghai. China has implemented a zero-Covid policy. But it remains to be seen whether this is sustainable, especially as most other parts of the world are learning to live with the virus.

China has also implemented strict regulation in sectors like technology, private education, and property in recent years. This is in keeping with China’s ‘common prosperity’ agenda and aims to protect low-income families, though it has the potential to impact growth. Combined with fresh lockdowns, this could lead to looser monetary policy to stimulate economic activity. By looser monetary policy, we mean lowering interest rates and increasing the amount of money in the economy.

Factories have also had to shut down, and production and operations have halted for some industries. This, along with shipping delays at ports, could cause disruption in supply chains – companies globally could experience delays in receiving manufactured goods. The impact might be less severe than in 2020 as previous supply shortages are now unwinding but, either way, uncertainty remains.

What does this mean for emerging markets?

While the world’s use of commodities might change over time, demand for resources won’t diminish overnight. Ongoing sanctions against Russia means rising commodity prices could be around for longer. This could provide ongoing support to the Latin American region.

But what happens in Ukraine is likely to continue to have a big impact on what happens to global markets. The removal of Russia as a potential trading partner for large parts of the world could help increase investments in other emerging markets.

Some countries have already started to increase their spending on renewable energy, for example, which could increase opportunities for companies and reduce reliance on global energy suppliers. This will take time and significant spend though.

China makes up a huge part of Asian markets and is linked with economies all over the world. The actions it takes have the potential to reverberate across the globe.

The country could be hit hard by a wave of infections if it eases restrictions, especially as it has low vaccine uptake from older groups and reliance on less effective jabs. That said, things could turn around once it finally removes restrictions. A period of pent-up demand could later boost consumer spending, and benefit consumer and ecommerce companies.

The uncertainty means company valuations across the region are relatively attractive. In particular, Chinese shares look good value in our view. This presents opportunity for long-term investors, but the ongoing war, inflation and the pandemic mean we could see more volatility in the short term. Remember, past performance isn’t a guide to the future.

What’s important is that investors focus on their longer-term goals and appetite for risk. Economic events and sentiment can have a big impact on markets in the short term. But in the long run, performance should be driven by how well companies do and their earnings potential.

We think Asian and emerging markets offer long-term growth opportunities, as well as diversification away from more familiar markets like the UK and US.

How have stock markets performed?

It was a volatile start to 2022 for markets, with investors concerned about the potential for rising interest rates and inflation. Things got worse in February when the Russia/Ukraine war broke out, leading to lots of uncertainty and a renewed market setback.

Looking at the past 12 months, to the end of April 2022, the emerging stock market has fallen 5.98%*, while the Asian market (excluding Japan) has lost 7.22%. This compares with a gain of 6.09% for the global stock market, benefiting from ongoing strength in the US and a bounce back in the UK. As always, past performance isn’t a guide to future performance.

There have been some big differences between markets. Unsurprisingly, the invasion meant the Russian market fell sharply at the end of February. Russia subsequently stopped foreign investors trading its shares, leading to many professional investors, including fund management groups, to revalue their Russian investments to zero.

Russia’s also been removed from major benchmarks, including FTSE Russell and MSCI indices. This means that following the precipitous fall, Russian share prices are no longer included in major emerging market indices.

Aside from Russia, China has been the weakest market over the year. New lockdowns raised investor concerns, while large tech companies with high growth expectations fell out of favour earlier this year. Other sectors, like property, were also hurt by regulatory crackdowns from China’s authorities.

On the other hand, India was the best performing market over the year, growing 30.25%. An increasing pace of vaccination, support from its government and the Reserve Bank of India, and a number of new company listings, have helped the market.

Some investors have also simply favoured investing in countries like India that haven’t recently faced some of the same issues as others. Strong performance means India doesn’t look as good value as other Asian markets, though lots of investors are still attracted to the quality of businesses located there.

Emerging stock markets - one year performance

Past performance isn’t a guide to the future. Source: *Lipper IM, to 30/04/2022.

Annual percentage growth (%)
Apr 17 -
Apr 18
Apr 18 -
Apr 19
Apr 19 -
Apr 20
Apr 20 -
Apr 21
Apr 21 -
Apr 22
FTSE All World 7.77 11.26 -1.29 33.40 4.76
FTSE Asia Pacific ex Japan 11.46 2.68 -5.57 37.38 -7.22
FTSE China 23.81 1.19 1.76 26.33 -28.92
FTSE Emerging 11.45 3.23 -8.66 33.94 -5.98
FTSE India 5.73 6.47 -17.87 41.22 30.25
FTSE Latin America 9.65 1.34 -34.85 35.66 12.90

How have Wealth Shortlist funds performed?

Asian and emerging markets Wealth Shortlist funds have delivered mixed performance over the year. We usually expect this. A range of managers with different strengths, styles and areas of focus will perform differently.

Remember, past performance isn’t a guide the future, and performance here is over a short time. All investments fall as well as rise in value, so you could get back less than you invest.

For more details on each fund and its risks, please see the links to their factsheets and key investor information below.

Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

The Jupiter India Fund was the best-performing Wealth Shortlist fund in these sectors over the year to the end of April 2022. It benefited from the strength of the broader Indian market, and good stock-picking from fund manager Avinash Vazirani.

Find out more about Jupiter India, including charges

Jupiter India Key Investor Information

JPMorgan Emerging Markets was the weakest performer in this sector. A focus on quality companies with sustainable or higher-growth earnings prospects, including Chinese tech companies, boosted performance in 2020. However, this style broadly fell out of favour with investors last year.

Businesses that are expected to do better during an economic recovery have performed better since the vaccine announcements in November 2020. This includes materials, industrials, and commodities-related companies. The fund’s managers don’t invest as much in this type of company, so the fund missed out on some of the gains made.

The managers continue to focus on companies they expect will grow more sustainably over the long run. This includes ones that could benefit from innovation and growth in how much people consume.

Find out more about JPMorgan Emerging Markets, including charges

JPMorgan Emerging Markets Key Investor Information

Annual percentage growth (%)
Apr 17 -
Apr 18
Apr 18 -
Apr 19
Apr 19 -
Apr 20
Apr 20 -
Apr 21
Apr 21 -
Apr 22
Jupiter India -8.33 -8.04 -23.56 27.98 31.63
FTSE India 5.73 6.47 -17.87 41.22 30.25
JPM Emerging Markets 12.99 8.18 -3.06 42.43 -21.53
FTSE Emerging TR GBP 11.45 3.23 -8.66 33.94 -5.98

Past performance isn’t a guide to the future. Source: *Lipper IM, to 30/04/2022.

What are the fund managers’ views?

We’ve recently spoken with several emerging markets fund managers, to get their take on recent market performance. This includes the managers of the JPMorgan Emerging Markets , Schroder Small Cap Discovery and ASI Emerging Markets Equity funds.

Similar themes have come out of our meetings. Any exposure to Russia or China has hurt the performance of emerging markets funds this year, but another key theme is the rotation from growth to value.

Over the past year, value investing – focusing on companies whose shares are deemed to be ‘cheap’ compared with their future prospects or are going through a temporary setback – has made a comeback.

On the other hand, growth investing hasn’t done as well, especially since the end of 2021. This style of investing focuses on companies with high growth prospects or the potential for higher earnings in the future. Rising inflation is typically a headwind for this style, as it reduces the value of future cashflows.

Importantly, these managers are sticking to their tried-and-tested investment processes that have seen them in good stead over the long term. We still think investors should have exposure to have a range of investment styles, in order to achieve a well-balanced portfolio.

Fund Insight: our weekly email

Please correct the following errors before you continue:

    Existing client? Please log in to your account to automatically fill in the details below.

    Loading

    Your postcode ends:

    Not your postcode? Enter your full address.

    Loading

    Hargreaves Lansdown PLC group companies will usually send you further information by post and/or email about our products and services. If you would prefer not to receive this, please do let us know. We will not sell or trade your personal data.

    Our fund research is for investors who understand the risks of investing and that investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

    What did you think of this article?

    Important notes

    This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

    Editor's choice – our weekly email

    Sign up to receive the week's top investment stories from Hargreaves Lansdown. Including:

    • Latest comment on economies and markets
    • Expert investment research
    • Financial planning tips
    Sign up

    Related articles

    Category: Investing and saving

    Investing for beginners – choosing your first investment

    Thinking of making your first investment? Here are some tips and ideas to help you get started.

    CJ Hill

    23 Jun 2022 7 min read

    Category: Funds

    European stock market and funds review – a difficult year ahead?

    We look at how Europe’s economy and stock market has fared, where the opportunities could be and how European funds are doing.

    Josef Licsauer

    22 Jun 2022 9 min read

    Category: Funds

    Investing in infrastructure – 2 investment ideas to track the market

    We look at infrastructure as an investment opportunity and share two passive options to track the market.

    Alexander Watkins

    21 Jun 2022 5 min read

    Category: Funds

    Pension annual allowance pitfalls – how to navigate them

    With pension annual allowance breaches spiralling, we take a closer look at what the annual allowances are and how to navigate the pitfalls.

    Helen Morrissey

    21 Jun 2022 5 min read