Investment managers – Edmond de Rothschild, Guinness Global Investors and Franklin Templeton – share their insights on the case for emerging markets, which has been tested by the Middle East conflict.

Despite fears about the impact of the Middle East conflict, which has tested the resilience of Asian and emerging markets, many of which are oil importers, experts at Edmond de Rothschild, Guinness Global Investors and Franklin Templeton remain optimistic about the outlook for these counties.

Many wealth managers also believe that the worst of the economic impact from the Iran conflict is behind them, although it is still too early to conclude that a sustained recovery is underway.

This week, a US official said that the US and Iran have agreed to pause their attacks and allow vessels to move through the Strait of Hormuz which is essential for global oil markets. Although an interim peace deal was signed on 17 June, technical talks between both sides still need to resume in order to finalise an end to the war.

In a recent interview with this news service, Fang Liu at Geneva-based Edmond de Rothschild said that many Asian countries rely on oil imports. “China is the biggest importer of oil, with about 45 per cent coming from the Middle East,” she said. However, like a number of wealth managers such as Edmund Shing at BNP Paribas Welath Management, she said that China still has plenty of stocks to keep it supplied for a few months, making it quite resilient in terms of energy supplies. Although it still relies on fossil fuels, China also produces more than 80 per cent of all solar photovoltaic panels, half of the world’s leading electric vehicles and a third of its wind power. Liu also believes that the relationship between China and the US has stabilised.

India and Japan are also highly exposed to oil imports from the Middle East. However, Japan has plenty of stocks to keep it supplied for several months while India is more vulnerable.

Lisa Wang from California-based Franklin Templeton Investment Solutions is also positive about the outlook for emerging markets, driven by tech. Within their multi-asset portfolios, Wang told this news service in an interview last week, they are overweight in emerging markets, notably Korea and Taiwan, as well as US equities. “Despite the Middle East conflict, we kept our overweight in emerging markets last year,” she said. “Asia has been affected by the conflict but we have kept our positive view. We are underweight in Europe and the UK,” she continued. “We remain cautiously optimistic about the market outlook and on a resolution to the Middle East conflict.” However, although many believe that tensions between China and Taiwan have reduced recently, Wang thinks that China ultimately sees Taiwan as part of its territory.

Mark Hammonds, portfolio manager, Asian and emerging markets at London-based Guinness Global Investors, also remains optimistic about the outlook for emerging markets, despite the conflict.

He believes that deepening trade links between emerging market economies means that intra-emerging market trade is accounting for a larger share of global trade as a whole. This helps create a degree of insulation from external shocks and allows emerging market countries to diversify their supply chains away from established trade relationships.

Rising incomes and an increasingly urbanised population within emerging market economies are also allowing local companies to focus on internal markets while drawing the attention of multinational ones to invest in the region to gain a larger market share.

Hammonds co-manages the Guinness Emerging Markets Equity Income strategy which aims to provide investors with capital growth and income by investing in emerging markets worldwide, providing returns of 8 per cent. The fund is exposed to dividend paying companies in emerging markets worldwide. He invests in companies with good track records.

Top holdings include Taiwan Semiconductor Manufacturing Company (TSMC), Taiwan’s Elite Material in the electronics supply chain, Taiwan’s Hon Hai Precision Industry in electronic manufacturing, Mexico’s Coca-Cola Femsa and China’s Anta Sports. Top countries are China, Taiwan, Brazil, India and Mexico. Top sectors include financials, tech, consumer staples and discretionary.