BlackRock’s Fink ‘bearish’ on emerging markets

CEO of BlackRock, Larry Fink: COVID-19 pandemic is taxing emerging economies and their health systems more than developed countries. (AFP)
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Updated 18 October 2020

BlackRock’s Fink ‘bearish’ on emerging markets

  • ‘The risk premium that you’re going to have to demand to invest in the emerging markets is growing persistently’

NEW YORK: BlackRock CEO Larry Fink said that he believes emerging markets are on a downward slide as he sees strong macro trends weighing on the asset class.

“I am pretty bearish on the emerging world,” Fink said at an online event hosted by the Institute of International Finance.

He said the COVID-19 pandemic is taxing emerging economies and their health systems more than developed countries, deglobalization is hurting the commodity-dependent countries and the group is more sensitive to effects of climate change.

“When we talk about climate change, and we think that’s a big issue and a reallocation of capital,” Fink said, “part of that reallocation of capital is movement out of the emerging world.”

Outside these global macro trends, a lack of trust in EM governments is further hurting the asset class, the head of BlackRock said.

“We’re seeing a flip-flop of governments. 

“One government could raise a lot of debt, new government comes in and (there’s) different behaviors, different attitudes, and it doesn’t create any confidence for the debt holders,” Fink said.

“The risk premium that you’re going to have to demand to invest in the emerging markets is growing persistently.”

Following a sharp spike in March as COVID-19-related shutdowns spread all over the world, the rolling-year average premium demanded to hold EM debt rose to its highest in more than a decade.

BlackRock is the world’s largest asset manager with almost $8 trillion under management.

Fink added that many emerging countries are going to have to restructure their debt and their leaders are not aware of who is holding the debt and how that affects a restructuring.

“I have had three or four conversations with leaders of different emerging countries . . . it’s like I’m telling them some facts from outer space,” Fink said.


China aims for sustained and healthy economic development

Updated 30 October 2020

China aims for sustained and healthy economic development

  • Beijing to let market forces play decisive role in resources allocation, report says

BEIJING: China is targeting sustained and healthy economic development in the five years to 2025, with an emphasis on a higher quality of growth, the Xinhua news agency said on Thursday, citing the ruling Communist Party’s Central Committee.

President Xi Jinping and members of the Central Committee, the largest of the ruling party’s elite decision-making bodies, met behind closed doors from Monday to lay out the 14th five-year plan, a blueprint for economic and social development.

China’s external environment “is getting more complicated,” the agency said, adding, “There is a significant increase in instabilities and uncertainties.”

BACKGROUND

China aims to boost its gross domestic product (GDP) per person to the level of moderately developed countries by 2035, while GDP is due to top 100 trillion yuan ($15 trillion) in 2020.

However, the country’s development was still in a period of important strategic opportunities, despite new challenges, it said.

It added that China aims to boost its gross domestic product (GDP) per person to the level of moderately developed countries by 2035, while GDP is due to top 100 trillion yuan ($15 trillion) in 2020.

China will also deepen reforms and let market forces play a decisive role in resources allocation, the agency said.

China will promote a “dual circulation” model, make self-sufficiency in technology a strategic pillar for development, move to develop and urbanize regions, and combine efforts to expand domestic demand with supply-side reforms, it added.

The “dual circulation” strategy, first proposed by Xi in May, envisages that China’s next phase of development will depend mainly on “domestic circulation” or an internal cycle of production, distribution and consumption, backed by domestic technological innovation.