In order to stem the tide of the economic effects of Covid-19, emerging markets (EM) have resorted to playing a game of follow the leader. As such, EM central banks have been able to play more hands in the proverbial poker game of monetary policy, including the stimulus card.
“Central banking in emerging markets has undergone a quiet revolution during the Covid-19 pandemic,” a South China Morning Post article noted. “Unlike in past crises, they have been able to mimic what central banks in advanced economies have been implementing: countercyclical policies with quantitative easing, local-currency asset purchases, interest rate cuts, and monetization of government deficits.”
“In the past, such policies would have fuelled inflation and downward exchange rate pressure, but not so this time. With the exception of a few central banks that were already in trouble before the pandemic, emerging market central banks have been able to use QE to create more room to respond to the crisis,” the article added.
Banking on a Successful Reopening
As global economies continue to reopen, the EM space is still a good opportunity to capture diversification and growth as a value-tilted option, but the right strategy that highlights due diligence is a must—enter the Goldman Sachs ActiveBeta Emerging Markets Equity ETF (GEM ).
GEM seeks to provide investment results that closely correspond, before fees and expenses, to the performance of the Goldman Sachs ActiveBeta® Emerging Markets Equity Index. The fund invests at least 80% of its assets (exclusive of collateral held from securities lending) in securities included in its underlying index, in depositary receipts representing securities included in its underlying index and in underlying stocks in respect of depositary receipts included in its underlying index.
The index is designed to deliver exposure to equity securities of emerging market issuers. In order to obtain the highest quality equity exposure, GEM aims to acquire stocks based on four well-established attributes of performance: good value, strong momentum, high quality, and low volatility.
In a capital market environment where value is often pitted against growth in a battle of factors, GEM uses both in addition to other factors that can filter out the best equities that can capture upside, but at the same time, mute the effects of a downturn. Rest assured, GEM gives investors the diversification they seek with emerging markets, but only the best that EM equities have to offer using their strategy.