What we learned from one of the biggest election years ever

Ada Chan, Senior Portfolio Manager

If it feels like a hectic year for emerging markets investors, you’d be right.

More than 70 national elections took place around the world in 2024, according to the International Institute for Democracy and Electoral Assistance – an intergovernmental organisation that supports democracy worldwide.

A big year for elections

Investors in emerging markets (EM) can expect more certainty after a huge year in national elections, says Pendal emerging markets fund manager Ada Chan.

“We will have to wait and see the details on many Trump Administration policies … and implementation is key from the US.”

But there are already actionable lessons to be drawn from elections in Indonesia, Mexico and India – which all had “very different elections this year,” Chan says.

“In Indonesia, there is continuity and stability and that is viewed positively. It is a market where reforms are [working] and driving the economy. That’s a differentiator among ASEAN markets.”

“In Mexico investors expected Claudia Sheinbaum to win, but the surprise was her super majority. There was also an overlap with her predecessor … and that created uncertainty and investors don’t like uncertainty,” she continues.

“Mexico is a difficult market – which part of a valuation is driven by a carry trade unwinding, which part is driven by local politics and which part is driven by anticipation of what Donald Trump is going to do. We think a lot of the bad news is already in valuations.

“In India, people expected Narendra Modi to win, and he did. But markets in India are pricing in perfection. In India it isn’t so much about the election as high valuations.”

China

Investors in China should focus on domestic industries, rather than manufacturing exporters, Chan says, ahead of any Trump Administration decision on tariffs.

“The Chinese government wants to stimulate its economy. But I think there is a little bit of wait and see, to make sure they know what Trump is proposing,” Chan says.

“It is a timing issue for China. They want a bit more clarity [on the Trump Administration] before they come up with their stimulus. We do expect there will be more stimulus, but it is a step-by- step process.”

Chinese consumers are changing as well. Previously foreign brands sold better than local products but that is no longer the case.

“Chinese consumers are embracing domestic brands. They can buy better products, with higher average prices, that are a lot cheaper than foreign brands,” Chan says.

Country-first analysis

Chan’s investment process starts with identifying a promising country, based on an outlook and valuation perspective.

“There are opportunities emerging in China [as an example]. We think people had become too pessimistic and gone too extreme when looking at China,” she says.

“We saw Chinese companies report better numbers, raise forward earnings [guidance] and then get sold off.

“There is the opportunity to [invest] in companies that are becoming stronger because management are focusing on what makes the business more efficient, in an environment which is very difficult.”