Good news: Some market observers and professional investors think emerging markets equities will be able to again firm up even amid dollar strength.
“As that momentum slows in the dollar and U.S. bond market, I think what you’re going to see is some rotation back into emerging markets,” HSBC’s Herald Van Der Linde told CNBC in an interview.
Investors can stay involved with emerging markets equities even as the dollar soars with ETFs such as the Deutsche X-trackers MSCI Emerging Markets Hedged Equity ETF (DBEM). If the U.S. dollar continues to strengthen against foreign currencies, investors can consider DBEM to access the emerging markets and limit currency risks.
Bolstering the case for DBEM is that emerging markets central banks are not shying away from cutting interest rates to support exporters. For example, Brazil has lowered borrowing costs twice in recent months.
Van Der Linde “pointed to plays on themes that weren’t sensitive to global and macro developments, such as financial inclusion, automation, changes in retail formats and the Asian defense industry,” reports CNBC.