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Making the Most of Emerging Economies

Investors may find it tempting to pursue a broad risk-off approach to the entire emerging world, especially in the context of rising global trade tensions. But it would be a mistake to ignore the very favorable conditions that exist in some emerging economies.

PARIS – Once again, the world’s emerging economies are facing a bout of uncertainty. Argentina, South Africa, and Turkey are among those generating the most concern, owing to a combination of questionable monetary policies and currency depreciation vis-à-vis the US dollar that threatens to undermine these countries’ ability to service their debts. But not all emerging economies are created equal.

To be sure, as in the past, there is a distinct risk of contagion. The emerging economies that are most vulnerable each must address its own challenges to avoid falling victim. And the approaches countries take to the challenges they face will have knock-on effects of their own.

Given this, investors may find it tempting to pursue a broad risk-off approach to the entire emerging world, especially in the context of rising global trade tensions. But it would be a mistake to ignore the very favorable conditions that exist in some emerging economies. For example, many have made significant progress in managing their debt levels, raising productivity, improving infrastructure, and implementing needed reforms.

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