UBS Global Wealth Management on emerging markets outlook for 2022

UBS Global Wealth Management's Chief Investment Officer for Emerging Markets, Michael Bolliger, recently shared insights on the outlook for emerging markets in 2022. In a CNBC Africa interview, Bolliger highlighted key themes and expectations for the upcoming year. One of the central themes discussed was the market's readiness to accept higher inflation amidst continued volatility. Bolliger emphasized the importance of central bank policies and the stabilization of inflation numbers for market dynamics in 2022. He expressed optimism that the impact of the COVID-19 pandemic on markets and economies would diminish, paving the way for a year characterized by strong growth and investment opportunities. Bolliger outlined a forecast for 2022, highlighting a potential division between the first and second halves of the year. The initial months are expected to see robust growth, led by the U.S. and other developed markets, with emerging markets catching up later in the year. While acknowledging the momentum in developed markets, Bolliger noted that emerging markets, particularly China, are poised for stabilization and growth, pointing to signals such as reserve requirement ratio cuts. Despite the preference for developed markets in the short term, UBS maintains an optimistic view on emerging markets and anticipates improved performance in the coming year. When questioned about the potential impact of high inflation on central bank policies, Bolliger acknowledged the global debt challenges exacerbated by the pandemic. He highlighted the possible benefits of tolerating higher inflation for economic rebalancing over the long term. In line with the Fed's shift in mandate towards average inflation targeting, Bolliger indicated that central banks might adopt a more accommodative stance towards inflation. Discussing the investment landscape, Bolliger emphasized the cyclical opportunities in the Eurozone and Japan, projecting these regions to outperform the U.S. in the short term. He noted the diverging paths of central banks, with some maintaining accommodative policies while others adopt a more hawkish approach. Regarding emerging market assets, Bolliger suggested a potential turnaround in 2022, drawing parallels to previous cycles where asset performance improved post-tapering measures. He highlighted the potential for a rebound in emerging market currencies, particularly with the anticipated stabilization and growth in China and Asia. Despite current challenges, Bolliger remains hopeful for a brighter outlook in 2022, underscoring the cyclical nature of market cycles and the potential for emerging markets to recover and thrive.