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DJ Emerging and Growth Markets, February 6th 2021 -2-

· 02/07/2021 16:50

Latin America's largest country risks becoming a breeding ground for more potentially dangerous coronavirus mutations, say infectious disease specialists. "The virus found a favorable home in Brazil -- there is no real lockdown here, many people don't respect social distancing measures or even wear masks," said Ana Tereza Vasconcelos, a researcher at the government-backed LNCC laboratory in Rio de Janeiro state that has been tracking Brazil's Covid-19 variants.


Predictions of a multi-speed recovery across emerging markets prove prescient. A year into the pandemic it appears that the predictions of a so-called K-shaped recovery, where some economies and individuals bounce back strongly and swiftly and others face a long, difficult recovery, are coming true, according to Stuart Culverhouse, head of sovereign & fixed income research at UK-based Tellimer Research. "Pre-Covid fundamentals and government competence allied to policy flexibility will have a significant impact on their recoveries, and those with weaker growth will find it more of a struggle even if they faced a shallower downturn than faster growing economies," he told the Journal.

"Countries such as Senegal, Benin and Côte d'Ivoire that had good fundamentals -- fiscal discipline, high growth, stable debt -- are faring quite well through this shock," he added.

Investors looking to tap into the recovery across emerging and growth markets -- and there are many, according to fund data provider EPFR Global, which has noted strong investment inflows in recent months -- will have to be more discerning, Mr. Culverhouse said.

Among countries facing a slow return to pre-Covid levels of economic activity are Argentina, South Africa and Mexico, none of which Tellimer expects to have fully recovered even by the end of next year. India, by contrast, should more than recoup last year's 8% contraction, growing by a forecast 11.5% this year.

Global trade rebound provides opportunities for investors. A strong revival in trade has helped exporters -- and investors focused on them -- recover from a dismal year, a report by trade-credit insurer Atradius shows. In its annual assessment of the most promising markets for trade and investment, the firm said Chile, Egypt, Senegal, Malaysia and Vietnam are best positioned to benefit from a trade revival, in part because they have relatively stable governments.

The growing middle class in the five countries is also helping improve the investment environment, providing a boost for the domestic economy that will enhance valuations of local companies.

Chile in particular stands out, according to the report because, despite being among the countries hit hardest by the Covid-19 pandemic, its economy is poised for strong growth. "Chile has an attractive business environment, underpinned by sound institutions, low corruption and effective macroeconomic policies...it proved to be resilient against the Covid-19 shock and is well placed for a robust recovery in the coming years," Atradius said.

The Milken Institute also this week named Chile as the Latin American country with the most potential to attract foreign investors based on an assessment of almost 100 variables including potential for innovation, the business environment and macroeconomic strength.

What We're Reading

Concern grows over potential impact of Ethiopia's debt restructuring plan. ( Reuters)

Ethiopia prepares to put two key telecoms licenses up for auction. ( AfricanBusiness)

South Africa Covid-19 strain: What we know about the new variant. ( WSJ)

Former commander of Lord's Resistance Army convicted of war crimes. ( WSJ)

Zimbabwe: Covid-19 kills another former minister. ( Anadolu Agency)

Vietnam's breakout moment. ( Nikkei)

Vietnam's Communist Party reelects chief to lead the nation. ( AP)

Vietnam to invest up to $8 billion developing world-class ports. ( Maritime Executive)

Sri Lanka halts port deal with India and Japan. ( AP)

Opposition grows to China's investments in Pakistan. ( Asia Times)

Myanmar's military coup could hurt supply chains. Why the disruption might be short-lived. ( Barron's)

Chinese ship's incursion into Philippine waters causes alarm. ( Al Jazeera)

Thai central bank keeps rate steady as economy recovers slowly. ( WSJ Pro Central Banking)

India plans nearly $76 billion capital spending to counter Covid-19 impact . ( WSJ)

Russian Covid-19 vaccine was highly effective in trial, boosting Moscow's rollout ambitions. ( WSJ)

Russia to expel diplomats in dispute over Alexei Navalny. ( WSJ)

Exiled Uighurs in Turkey fear China's long reach -- 'We are all panicking now.' ( WSJ)

Ecuador to pick new president amid deepening economic crisis. ( AP)

Biden withdraws from Trump's agreement to send asylum seekers to Guatemala. ( WSJ)

Brazil's recent past a challenge to winning ESG credibility. ( WSJ)

(END) Dow Jones Newswires

February 07, 2021 16:50 ET (21:50 GMT)

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