CI Asset Management expects investors to return to emerging markets in 2023

• Published date: 19 December 2022
• Publication title: Daily News Egypt

CI Global Asset Management said in its note on New Year's Predictions, The world is grappling with yet another disruption of the normal course of business. No sooner had we moved on from the misery of a pandemic than we woke up to news of war in Europe on the fault lines of an historical ideological clash between the global east and west, exacerbating price inflation that had already been ticking higher since the latter part of last year because of supply chain constraints.

The note added that the war between Russia and Ukraine is an unfortunate development, particularly for those directly affected by the violence, and has had far-reaching effects on people's cost of living across the globe in both rich countries and in more vulnerable emerging economies. Largely because of the abundance of natural resources in both countries directly involved in the armed conflict, annualized inflation has risen to 9.

8% globally compared to 5.7% at the end of last year and a five-year average rate of 4.

6%.It explained that Policymakers in the world's largest economy, where stubbornly low unemployment and strong wage growth have rubbed up against the global dearth in the supply of goods, have taken notice.

The US Federal Reserve, the world's most watched central bank, has hiked rates seven times so far this year in what appears to be an attempt to induce a marked slowdown in demand through monetary tightening, as inflation rose to between 8 and 9% and unemployment remained at only 3.5% compared to a ten-year average of 5.

3%.It pointed out that tightening by the Federal Reserve has naturally led to a rise in bond yields as debt investors adjust return expectations in real terms.

Long (ten-year) yields in the US have risen by around 200 basis points in 2022 and the median yield on emerging bonds has followed suit.This has both hurt returns for existing bond investors and made financing more costly for most government issuers.

It has also spilled over into equity markets, which are down 17% in the year-to-date (as measured by the MSCI ACWI index) and at their low for the year were down by as much as 27%.Despite the erosion in real disposable income, the global economy remains arguably strong.

Growth in world output is expected to be close to 3.2% in 2022, down...