“If you look at some of the emerging markets in Eastern Europe, given that they are much more directly affected by the Russo-Ukraine war, the sentiment towards some of those countries is much worse, perhaps compared to some of the Latin American countries that are really benefit from increases in commodity and agricultural prices,” says Greenberg.
From a regional perspective, he said that Eastern Europe has suffered some residual damage from the conflict because it has the most direct trade ties. The impact on European growth, on both the developed- and developing-market fronts, is affecting emerging markets as a whole, he says. In addition, Europe is grappling with supply chain conflicts as well as the ongoing refugee crisis.
Beyond Europe’s borders, he says, investors may consider drawing a line between emerging markets that are heavy importers of energy, which are exporters of energy. Heavy energy buyers include places such as South Korea, which relies on imports for about 93% of its energy needs. India’s 46 percent may not sound that impressive – until you consider that it has the second largest national population in the world.
The conflict in Ukraine is also sending food prices higher due to disruptions in food exports coming from Russia, Ukraine and Belarus. “If you look at a country like India, 50% of their inflation basket is food. In places like the Philippines, China, and Russia, it’s about 30%,” Greenberg says. “Compare this to America, where food is just 8%.”
Through the lens of a field, he says consumer discretionary names in developing markets may be up for the reckoning. As rising food and fuel costs take up a large portion of the average consumer’s budget, it eats away at their ability to spend on non-essentials.
