Exploring geopolitics in emerging markets, Cathy and Mehill discuss managing active wars, China's impact on global markets, and the Middle East dynamics. They emphasize understanding risks, capital flows, and finding opportunities amidst uncertainties.
Active management of geopolitical risks prevented spillovers from conflicts in Ukraine and the Middle East, influencing China's strategic decisions.
Implications of China's economic strength on emerging markets vary between short-term instability and long-term stability, highlighting the importance of balanced growth.
Deep dives
Emerging Market Geopolitical Risks Management
The podcast discusses how active management of geopolitical risks has prevented spillovers from two active wars, notably the conflicts in Ukraine and the Middle East. The caution shown by global powers like the US and Germany towards Russia, as well as the shared interest in avoiding full-blown conflicts in the Middle East, have helped contain these conflicts. These dynamics have also influenced China's strategic decisions, signaling a shift in their approach towards military actions, with implications for global South countries' responses to great power competition.
Impact of China's Strength on Emerging Markets
The episode explores the impact of China's economic strength on broader emerging markets, presenting contrasting short-term and long-term perspectives. An economically weak China may reduce financing and commodity demand initially but could lead to long-term stability, while a strong China poses short-term benefits but long-term risks, potentially escalating regional tensions like the Taiwan Strait issue. The ideal scenario is seen as a balanced growth for China to manage risks effectively without aggressive military actions.
Resilience of Emerging Markets amidst Geopolitical Challenges
The podcast highlights the resilience of emerging markets post geopolitical shocks like COVID-19, emphasizing factors like supportive US policies, credible institutions, higher commodity prices, and manageable debt levels. The dispersion in asset pricing and the narrative of 'higher for longer' in fixed income markets provide investment opportunities. By analyzing geopolitical contours and capital flows, the discussion focuses on identifying value and managing risks within emerging markets amidst evolving geopolitical landscapes.
Navigating the volatile landscape of geopolitics and its implications on emerging markets has become critical in this uncertain economic climate. In this episode, we provide an in-depth analysis of the current geopolitical landscape, its profound impact on emerging markets, and the risk factors on our radar.
This episode features PGIM Fixed Income’s Cathy Hepworth, CFA, Head of Emerging Markets Debt, Mehill Marku, Lead Geopolitical Analyst, and host, Tom Porcelli, Chief U.S. Economist.
Recorded on April 23, 2024.
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