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Societe Generale Says Emerging Markets Can Survive U.S. Downturn

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(Bloomberg) -- Money managers should think twice before letting a bumpy month of losses scare them away from emerging markets.

Developing economies are better suited to withstand a global downturn than in the past, said Bruno Braizinha, a rates and cross-asset strategist at Societe Generale SA. A U.S. recession next year or in early 2020 will probably be shallower than the global financial crisis a decade ago, and emerging market fundamentals are much stronger and supported by Chinese growth, he said in an interview.

"It’s the old decoupling scenario where EM remains robust in a U.S. slowdown," said Braizinha, who recommends a "significant allocation" to emerging markets. "That was talked about in 2007, but didn’t really work out."

Braizinha expects emerging-market stocks to outperform U.S. peers with Malaysia, Thailand, Indonesia and South Korea looking attractive. He also favors local debt from South Africa and Russia while Brazil and Mexico may offer appealing entry points ahead of their presidential elections.

©2018 Bloomberg L.P.

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