1. Optimism surrounding the government’s economic agenda has resulted in a more favorable investment climate in Brazil. The Brazilian market outperformed its emerging market (EM) counterparts with a 14% gain over the fourth quarter of 2019 and 27% increase for the year, both in US dollar terms. Inflation has remained under control, allowing the central bank to ease rates to record lows to stimulate the economy. We believe social security reform is key to stimulating investment and credit, which should help improve economic activity and significantly reduce Brazil’s fiscal deficit. A major privatisation plan has also been announced, and tax and other structural reforms should improve the ease of doing business.

2. Trade and slowing growth fears have largely overshadowed China’s initiatives to strengthen and diversify its economy. China will be a frontrunner in the fifth-generation wireless technology arena (5G) and is expected to have some 600m 5G subscribers by 2025, or about 40% of the forecasted 1.6bn subscribers globally. Together with artificial intelligence (AI) and robotics, this should help drive growth in China’s new economy as it strives to become less reliant on the United States. In our view, China will emerge from this challenging period stronger and more self-reliant, with multiple pillars of economic support.

3.  Kuwait is undergoing a multi-year effort to introduce fiscal reforms, increase investment and diversify away from oil dependence. In December, index provider MSCI stated that Kuwait met all the necessary requirements for reclassification to EM status and will be added to the MSCI Emerging Markets Index in May 2020 with an estimated weight of 0.69%. With substantial reserves, low levels of debt and a stable banking sector, we think Kuwait stands out among its peers. Despite trading at a premium to its EM peers, valuations in Kuwait remain reasonable, in our view.

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