Somerset Capital's Lam: The drivers of EM performance

'Prepare to go off the beaten track'

Fears of a trade war and a stronger US dollar have hit emerging market (EM) sentiment this year, and much of the market has duly followed into the red.

However, the recent turbulence has provided long-term investors with a good opportunity to build EM exposure. The general backdrop is positive. While most commentators focus on US dollar strength, global spending and capital flows are the fundamental drivers for EM performance.   Since early 2016, we have seen a policy shift away from austerity to greater spending. It is no coincidence that the increase in the US fiscal deficit since 2016-17 has coincided with the recovery in EM performance.  Investors eye safe havens fearing Trump's 'gunboat diplomacy' could lead to global trade w...