Ruchir Sharma breaks down opportunities in emerging markets

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The current macroeconomic backdrop calls for investing in emerging markets, says Breakout Capital founder Ruchir Sharma.

Higher commodity prices benefit emerging markets

This afternoon on CNBC’s “The Exchange”, Sharma quoted historical data to accent that emerging markets tend to do exceptionally well amidst inflated commodity prices. He said:

Given how much commodity prices are up, you’d expect emerging markets to be up a lot more. So, I think that relationship has broken down. Last time it broke down was in 2001-2002. And then we know what happened after that. There was a big boom in emerging markets.

The ongoing war in Ukraine still has oil prices up roughly 35% for the year, even after a more than 20% rundown over the past week.

Where to invest in the emerging markets?

According to Sharma, the iShares MSCI Emerging Markets ETF is unfit for investing in the emerging markets as it significantly exposes investors to China – a market that’s still “melting down”. He added:

The Latin American ETF is a better idea to play the commodity boom. If you want to be more selective, countries in the Middle East could do very well, the domestic demand there could do extremely well. Some of the beaten down markets of Eastern Europe may do much better.

Broadly speaking, he expects countries that are notable exporters of commodities to outperform against the current macroeconomic backdrop.

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