Posted on Dec. 2020 at 17:41Updated Dec 3, 2019 2020 at 19:07
Korea can still climb
The Seoul Stock Exchange rose 22% this year to new highs, driven by its technology (44% of the index) and pharmaceutical sectors. The management of the health crisis in South Korea made it possible to limit the spread of the epidemic. Unlike other emerging countries, its currency, the won, has appreciated against the dollar this year. To the point of worrying the financial and monetary authorities, while the country’s economy is very export-oriented: nearly 80% of the GDP is dependent on international trade.
The recovery of the global economy expected next year should continue to support the market. “Korea is in the best position to take advantage of a cyclical global recovery and a widening of the export cycle beyond the technology sector,” say Societe Generale analysts.
Korean companies’ profits are expected to grow by 20% this year, and could rise another 40% in 2021. “Growth will be broad based, with the tech, automotive and old economy sectors all contributing,” they specify.
Brazilian markets ready to rebound after difficult year
Brazil has distinguished itself this year by the disastrous management of the pandemic by its president. Moreover, it is still far from being out of the crisis. But the fall of the Brazilian currency, the real, offers opportunities for investors looking for yield. “It is the riskier markets which can rise the most”, recalls Xavier Hovasse, from Carmignac. The management boutique returned to the country during this year, and is now more exposed there than in the past decade.
It must be said that the real is down by more than 23% against the dollar, which itself depreciated this year. While it took about 4 reals to get a dollar in January, the price is now more than 5 to 1. This does not prevent the index of the São Paulo Stock Exchange, the Ibovespa, to accuse a loss of 4% in 2020 in local currency. “The real is undervalued today and Brazilian assets are well placed to rebound”, he adds.
The Brazilian market is very focused on raw materials, energy and the financial sector. These three sectors represent more than 50% of Ibovespa. However, they are expected to benefit from the upturn in activity expected next year thanks to the dissemination of vaccines. JP Morgan therefore expects the index to rebound by 20% in 2021.
India benefits from its population growth
The country is still suffering from the consequences of the crisis. For the first time in its history, India has entered a recession and is expected to see its economy contract by more than 10% this year, according to the IMF. And yet, international investors flocked to the Indian Stock Exchange. They acquired nearly $ 15 billion in shares this year, a record since 2014. Enough to push the Sensex index to new heights. It is up more than 8% since the start of the year.
“India is well placed to take advantage of its demographic dividend”, says Frédéric Rollin of Pictet AM. “The reforms initiated by the Modi government have had a short-term cost, but they are starting to bear fruit. “ The development potential is still very important in India. The country is expected to register stronger growth than China next year, at 8.8%, according to the IMF.
Its stock market is less geared towards new technologies than some of its neighbors. It thus offers a welcome diversification for investors wishing to avoid too much sector concentration while benefiting from the growth potential of emerging countries.