Correct choice in emerging markets vital

Standard Life Investments (SLI) has warned that selecting the right emerging markets to invest in will be vital in 2016, based on differing levels of financial vulnerability.

The asset manager said that after several years of relative underperformance, emerging markets face headwinds in 2016 from China’s slowdown and rebalancing, weak commodity prices, a rise in US interest rates and possibly more US dollar appreciation. SLI chief economist, Jeremy Lawson, commented: “Looking forward, widespread currency depreciation has helped to reduce external imbalances in many countries, although domestic imbalances remain widespread and will take much longer to be addressed. Venezuela and Egypt, with pegged or inflexible exchange rate regimes, remain the countries where risks are highest.” Lawson added that the outlook for fiscal balances has deteriorated notably in Latin America and Russia, and a marginal worsening of domestic balances led to a slight increase in risk for India, Indonesia, Mexico and the Philippines.