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JPMorgan Says Emerging Markets Shares May Gain 20% In 2021 Due To Large Ignoring Investors This Year.
«I think emerging markets are under-owned as we can see from the rally in the markets.», – said on Thursday CNBC «Street Signs Asia» Joyce chang (Joyce Chang), Head of Global Research, JPMorgan.
Apart from China and India, investors shunned many other emerging markets in 2020 as they were mainly looking for safety..
«We are actually China neutral right now, but we have refreshed our positions in the rest of the emerging markets where we think the valuations are attractive and we see more opportunities.», – Chang said.
In particular, the company sees opportunities for shares in Brazil, Indonesia, South Korea, as well as Thailand. In terms of industries, Chang said that the consumer discretionary sector, as well as the entertainment and leisure sector, can also «catch up».
Asked about the potential for emerging markets as a whole to outperform their developed country counterparts in 2021, a JPMorgan analyst said emerging market equities could rise by «double-digit» values up to 20%.
«I think there is some kind of rotational change ahead of us outside of China.», – Chang said.
Historically, she said, investors have allocated about 9% to emerging market equities. Currently, this share is about 7%..
«I think emerging markets have opportunities to catch up in 2021, she said..
This positive view extends to bonds as well..
«We think that you can get 5-6% on emerging market bonds, which is really good considering how developed the market is now low yielding and has negative yields.», – Chang said. «There is an attractive yield».
In an effort to keep financial markets afloat, major central banks like the US Federal Reserve have cut interest rates, lowering the cost of debt and making bonds less attractive. The benchmark 10-year Treasury yield remains below 1% for most of 2020. By comparison, the yield on China’s 10-year government bonds was 3.32% on Friday morning Singapore time..