A Weakening Dollar Is Good News for Emerging Markets Investors

While a global downdraft has affected nearly all segments of the market, emerging markets have been particularly impacted by a strong U.S. dollar.

Thus, emerging markets rallied in mid-December as the U.S. dollar weakened against other major currencies amid growing concerns of the U.S. economy seeing a recession, coupled with optimism around China’s lessened COVID-19 restrictions.

Plus, with emerging markets equities still trading at significant discounts, the valuations are attractive enough to offset the temporary issues in the markets.

With the dollar weakening, now could be an ideal time to buy in while emerging markets ETFs are still priced at a significant discount compared to broad U.S. equities. Three active ETFs that look compelling in the current market environment are the Matthews Emerging Markets Equity Active ETF (MEM), the Matthews Asia Innovators Active ETF (MINV), and the Matthews China Active ETF (MCH).

MEM invests in emerging market companies with perceived sustainable growth potential, capitalizing on consumption and innovation trends. The fund utilizes an all-cap, company-first approach, which emphasizes fundamental research over top-down country or sector allocation.

MINV, a high-conviction, concentrated equity portfolio, invests in innovative companies in Asia ex-Japan, capitalizing on the new economy and rising disposable income in the region. The fund takes an all-cap fundamental approach and focuses on companies with unique offerings that create or expand markets.

MCH is a high-conviction equity portfolio that seeks companies benefiting from China’s domestic consumption. MCH uses an all-cap fundamental GARP approach driven by proprietary research and combines long-term core holdings with more opportunistic ideas to provide consistency through cycles.

Despite the current economic uncertainty among emerging markets, positive indicators including rising wages and innovation in emerging markets, and signs of global disinflation have contributed to a constructive outlook for the asset class.

For more news, information, and analysis, visit the Emerging Markets Channel.