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Perspectives: The Emerging Markets value proposition
462 Plays2 days ago
Following an eventful first half, what does the future hold for Emerging Markets? Yerlan Syzdykov, Global Head of Emerging Markets, Amundi, joins HSBC’s Global Head of Emerging Markets Research, Dr Murat Ulgen, to discuss the widening gap between emerging market and developed market growth. They explore the key trends across equities and fixed income, the regions and local currency markets showing strength, and how Amundi is navigating the current landscape.
Watch or listen to find out more.
This episode was recorded on the sidelines of the HSBC Gulf Cooperation Council (GCC) Exchanges Conference in London on 17 June 2025.
Read more about the GCC conference here https://www.business.hsbc.com/campaigns/hsbc-gulf-cooperation-council-conference-gcc
Disclaimer: Views of external guest speakers do not represent those of HSBC.
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Transcript
Introduction to HSBC Global Viewpoint
00:00:01
Speaker
Welcome to HSBC Global Viewpoint, the podcast series that brings together business leaders and industry experts to explore the latest global insights, trends, and opportunities.
00:00:13
Speaker
Make sure you're subscribed to stay up to date with new episodes. Thanks for listening, and now onto today's show.
Meet Yerlan Sizdikov
00:00:22
Speaker
Hello everyone, welcome to our latest podcast as part of the perspective series we're recording here in London on the sidelines of the GCC Exchanges Conference.
00:00:33
Speaker
My name is Murat Hulgar, I'm the global head of emerging markets research and I'm very, very pleased to be joined by ah very distinguished guest and esteemed colleague from the industry, Mr. Yarlan Sizdikov, global head of emerging markets at Amundi.
00:00:47
Speaker
Yarlan, welcome. Thank you very much for having me.
Sizdikov's Career Journey
00:00:49
Speaker
I mean, lots to talk about, you know, a lot of things going on in the investment environment. And this podcast is about em emerging markets, which you are an expert of. But perhaps a good place to start is on a more personal basis. We would like to get to know Yerlan better.
00:01:04
Speaker
So can you tell us a little bit about your career, walk us through how it's progressed and your current responsibilities? Absolutely. ah My name is Yerlan Sizdikov. come actually from ah ah from Kazakhstan, which is in itself emerging countries. So I can say that I lived all my life in emerging countries and now following emerging countries.
00:01:22
Speaker
So I've been pretty much ah most of my career, I've been on the fixed income side the last 25 years. And today I'm responsible for both fixed income side but also on the equity side, the way that we build emerging markets ah is actually as a platform whereby we combine both equity and fixed income under one umbrella, which I think distinguishes us as one of the strongest players that have 360 degree approach to emerging market investing.
00:01:50
Speaker
Excellent. Thank you, Yerlan. This is great because I think that's the way the industry is moving as well. um So great to have the context.
Why Invest in Emerging Markets?
00:01:57
Speaker
But let's dive straight into the outlook of emerging markets for the remainder of this year, for the second half. And obviously an eventful first half.
00:02:05
Speaker
We've got so many things going on, trade tensions, tariffs on and off, we had bond market volatility, geopolitics, what have you. So what's the outlook for the second half of the year ah across the asset classes?
00:02:18
Speaker
We're looking at a big theme of reallocation of flows from the United States today into other markets. And I think distinguishing places that we believe that this money is going to flow to and continues to flow to is um Europe and emerging markets for various reasons.
00:02:37
Speaker
ah So it's diversification away from the US that is starting to really affect the flows into emerging markets. And I think this is really a great opportunity for us to look at emerging markets as a value proposition. So if we're like talking about equity, we we see a significant undervalued assets.
00:02:52
Speaker
We know China is very cheap. We have growth opportunities, and among which I think GCC clearly is one of them.
Growth Engines: India and GCC
00:03:00
Speaker
ah Maybe it's not universally perceived as cheap, but I think it's there's still great opportunities to invest in GCC. And of of course, India.
00:03:07
Speaker
so This is another engine of growth where we see 6% growth for the next decade that thed India is capable of growing. And therefore, for us, even the valuations are relatively tight, we still continue seeing opportunities in India that will abound.
00:03:21
Speaker
If you think about fixed income, of course, this is an opportunity for local currencies because we know that de-dollarization means that weaker dollar probably will kind continue to proliferate. That means that emerging market fixed income will receive more money, we believe, going forward into local currency markets, which so far has been pretty much neglected, I would say, in the last three years in terms of flows.
00:03:40
Speaker
So we've seen fixed income ah ah overall attracting more money, ah hard currency and corporate sovereign markets, but specifically now seeing interest towards um um local currency.
00:03:54
Speaker
And what is interesting, I think we're also looking at an opportunity to invest into single country ah markets where for the first time, I think in the last four or five years, we've seen an opportunity to invest into Chinese markets ah on the local currency basis and India.
00:04:11
Speaker
So standalone country allocation has been quite rare, but now investors are looking to really go into these specific areas to invest in. So I think this this is the the way that we're looking at the development of the market for the next for the next half of the year.
Impact of Global Conflicts on Emerging Markets
00:04:25
Speaker
Of course, the biggest challenge for us was going to be to understand how the current environment, especially the conflict in the Middle East, will affect our inflation and growth outlook. And of course, that is going to drive a lot the global monetary policy.
00:04:40
Speaker
But I think the overall overarching picture for us is a very positive one, where we also believe that the gap of the alpha a between, sorry, delta between emerging market growth and the developed market growth is going to continue widening.
00:04:57
Speaker
As we're seeing, the US growth is starting to go down, so we're looking at 1.6% for the next couple of years, whereas on average, emerging market growth is going to hold up. So I think we will have a gap widening, which is typically also a very bullish sign from emerging market perspective.
00:05:15
Speaker
Excellent. And actually, Yerlander, so many areas were in agreement because we thought this year, particularly after the trade tensions, Liberation Day, etc., with the U.S. dollar softening and weakening, we thought this could be a moment for local currency assets, starting a local currency debt.
00:05:30
Speaker
and then spilling over into equities. And now I look at performances year to date and they've done really, really well. So now I'm scratching my head. I mean, yes, we're directionally bullish, but the performances are strong.
00:05:42
Speaker
Do you think that's an impediment or would you say local currency, Yamaha says been neglected for such a long time that there is more legs to this trade?
00:05:52
Speaker
I think there are two kinds of investors that we're working with. Of course, we have retail investors who are potentially looking at, um with a lack, at the performances. So they really act on the past performances.
00:06:04
Speaker
So when they see that the local currencies are performing spectacularly this year in dollar terms or in euro terms, they're actually trying to come and buy these markets, and notwithstanding already performances are very strong.
00:06:15
Speaker
And then you have... um institutional investors who for the years have been looking at local currency market as maybe less efficient way to invest into emerging markets, specifically because they're looking at information ratio saying, well, look, um volatility because of the effects component is much higher.
00:06:33
Speaker
returns were lower than they were in hard currency terms. So why bother, basically? like So we're seeing, of course, after this two years of relatively decent, ah from from the emerging market perspective,
Monetary Policies and Market Volatility
00:06:45
Speaker
performances, they're starting to rethink that because obviously that's changing a little bit the perspective. Of course, it depends on what period of time you're looking at.
00:06:53
Speaker
But in the last five years, if we continue with this trend, next year is going going to be very interesting. And the fact that some of the institutional investors are coming in, into certain markets, as I mentioned to you, away from the dollar assets and into the specific Indian market or specific Chinese market, for example, in the local currency terms, which I haven't seen before, to be honest with you.
00:07:15
Speaker
No, that's excellent point. And you mentioned about this global monetary policy outlook, and obviously, It looks like we're in an easing cycle. I mean, yes, the US Fed is currently on hold, but at least that's our expectation.
00:07:26
Speaker
But we expect them to resume rate cuts later in the year, September, December. But the rest of the global center banks, you know, ECB, New Zealand, India, South Africa, they're all cutting rates.
00:07:37
Speaker
So that gives you a backdrop, perhaps the front end rates are coming in lower. But then we had big bond market volatility, you know, either back end in Japan or the US, some term premiums building based on the fiscal issues, etc.
00:07:51
Speaker
Do you think that's a problem for investing into emerging markets that this, you know, term premiums rising? Or is it like confined to more fiscally challenged economies? It's a great question. I think it affects obviously the sentiment. When you're seeing these wild gyrations on global markets, on the core markets like US, you're obviously having effects on the sentiment in global fixed income markets for sure.
00:08:15
Speaker
But what is very interesting is that we're looking at the problems that are being addressed by so-called bond vigilantes now. ah specifically those problems that we normally address for for the emerging markets. now for For years we've been effectively acting as investors, bond vigilantes for emerging markets.
00:08:33
Speaker
So I think therefore, I think the a lot of questions that we have about fiscal policy ah stance and how we actually can frame that within emerging markets are going back to hone some of the developed markets. no So when in in a way, we graduated from those issues, those those problems, right?
00:08:49
Speaker
That's one thing. And then the the the same issue we discussed with you for for the years is independence of central bank, yeah which is an issue that now we're discussing in the context of United States. right so And that is very interesting because we talk about Turkey, we talk about, you know,
00:09:03
Speaker
Other markets where we have challenges on that front, but we've been there. So investors in our case are used to do to to deal with those issues. Whereas I think a lot of investors who are developed market investors, they're not really used to deal with issues of that kind of nature. So for us, it's easier from the sentiment perspective to go through this.
00:09:24
Speaker
but Of course, we're gonna we're going to have to see the effect of stipendian curves globally on emerging markets, that's for sure. But the issue here for us is to to see how central banks are going to anchor the ah the um ah the rates and inflation expectations within their countries. And I think they're doing a much better job, to be honest, than Fed.
00:09:44
Speaker
i yeah I couldn't agree more with you because you know you and I, we spent our careers on following emerging markets. And now I would think in this current global context, the emerging market lens becomes very, very handy looking at the rest of the world.
Latin America's Market Challenges
00:09:58
Speaker
Let's you know shift gears a little bit and go perhaps deeper into regions. I mean, you did mention a few of them, but maybe I'll bring up Latin America. doing a survey for institutional investors like yourselves. The latest one be published towards the end of March, but it was the outlook for the second quarter.
00:10:13
Speaker
And we were already seeing some signs that investors were warming up to Latin American assets because 2024 was different for Latin America, you know more volatility, but beginning of this year, going into the second quarter, there was good interest.
00:10:26
Speaker
Is that something that you would agree, starting with Latin America and maybe other parts of the world as well across emerging markets? ah Latin America to us potentially could be in in in a scenario of global slowdown when we have US growth slowing, European growth slowing, and generally global growth is being challenged.
00:10:44
Speaker
I think Latin America probably will have to contend with lower commodity prices going forward. So I think this is obviously a very much cliche, but we're looking at exposure to commodities, global exposure to commodities, and it's obviously a big chunk, a bulk of what we invest into ah in Latin America. So I think we have to be careful and look for opportunities outside of some of the countries that will be exposed.
00:11:06
Speaker
Of course, ah we can see that the trade and tariff situation also affected some of the sentiment. We talked about Mexico and how it was affected. But in reality, I think this is going to be a a great opportunity to invest in Mexico over the next decade, potentially, because I think the ah that region probably will be more shielded um from that tariff pressure that we know is going to be ah moving towards east of of of the world. So I think ah for us, ah we're very cognizant that this is going to be more safe from the geopolitical perspective, from maybe from the trade flow perspective, countries, but also challenged because of a lower commodity pricing.
00:11:44
Speaker
Excellent. And talking a little bit deeper about GCC region, now that we're recording this on the sidelines of our GCC conference, ah you did mention that you're generally constructive, you know, structural growth story.
00:11:56
Speaker
But is it across the region or do you have any preferences? I mean, obviously we have, you know, some dependence to oil, even though this is being diversified, now oil economies are growing. But then you also have Egypt, which, you know,
00:12:09
Speaker
has done a lot over the years, but still some dependence to external funding, et cetera. So do do you make some differentiation or generally positive about GCC?
GCC's Economic Stability
00:12:17
Speaker
I can obviously talk very, very generally about regions. Of course, we do significant differentiating factors that determine our allocation. So from the GCC perspective, we're looking at stable countries um and stable from the from the perspective of the budgeting, from the fiscal perspective.
00:12:33
Speaker
And we're looking also at high growth opportunities, more dynamic countries, ah probably more ah the countries with with a more dynamism that I actually have been in a region a couple of weeks ago so i'm very lucky to come to this conference again and then to two so to meet even same people at this conference um but ah the um the impression I got there there's a lot of dynamism that's coming from the UAE, I think to us is the most dynamic economy.
00:13:01
Speaker
In a way, it's a connector economy that helps a lot of regional trade, builds up a lot of trading flows. And in a way, it's also the country that allows for growth ah in the commodity business, in the in information technology business. So there's a very conscious opportunity ah to ah pursue these policies for the policymakers in UAE. So I think this is the most probably stable and also growing ah story for us, stable from the fiscal perspective, because the oil prices in the budget, they they are, ah you know, in the mid-40s. I think they're they're going to be very comfortable to balance the budget at that oil price.
00:13:45
Speaker
And they're less dependent on that compared to other names in the region. so Outlook for other names in the region, of course, is going to be a bit more mixed ah because some of them probably overextended on the fiscal side. So they have to be ah looking at the measures that will balance the books, so to speak, to to bring more confidence.
00:14:03
Speaker
They have to look for the funding opportunities. And of course, that's going to affect the way that we treat you know sovereign, quasi-sovereign and also curves, as you mentioned, in in the overall steepening ah bias.
00:14:15
Speaker
And of course we we need to understand how um the investment projects that they have, they're obviously transformational ah in nature, how they will be affected by that belt tightening exercise, if you want. So I think this is kind of the region that is still very very very much into the growth with a very much um strong policy mix overall towards investing, towards consumption.
00:14:37
Speaker
um But we need to to be careful about how budget will affect that growth a pattern. And of course, there are other areas which are probably a little bit more concerning that, you know, traditionally, maybe the the the cur the ah weaker countries that from the fiscal perspective, we know we know which countries they are. But overall, the region is booming.
00:15:00
Speaker
We're seeing consumption patterns. We're seeing demographic patterns. We're seeing also women participation that is all going to really fuel that growth opportunity for us for the next decade.
From US to Emerging Markets: Capital Shifts
00:15:11
Speaker
Totally agree you. There are lots of structural forces driving growth. We are as a team, economic strategy, we're very constructive. But I suppose one thing perhaps I can add is our economists have done a lot of work on Asia and MENA trading corridors.
00:15:26
Speaker
And this is quite interesting because you might argue there is a global context of geo fragmentation, but then you have regional integration. So the economists, they think the Asia MENA, MENA trade corridor, the total two way trade can actually more than double over the next decade.
00:15:43
Speaker
Same for investment opportunities, UAE India links, China Saudi Arabia links, which are really very, very strong. So no, totally agree with you, Erl. Maybe I can bring the discussion back to the beginning because you said something very important, reallocation of some capital out of the U.S., which is something we also follow very closely. We get a lot of questions about it.
00:16:03
Speaker
Is this like an expectation or do you see it in numbers? Do you hear anecdotally that some capital is being relocated or is it more the case of extra surpluses will be invested elsewhere around the world?
00:16:16
Speaker
searching for some other alternatives because the rest of the world is already invested a lot in US s financial markets. No, i'm I'm giving you an anecdotal evidence from our client behavior. Of course, we can look at overall numbers and I'm sure you know much but much better overall industry numbers and than I do. But from our perspective, we're seeing relocation of one one mandate by a sovereign wealth fund away from US credit into emerging markets fixed income, for example. It's a significant mandate and we're happy to to see that mandate coming to us.
00:16:49
Speaker
um And we're also seeing um a lot more inquiries into the countries but which were maybe shunned before by by but US s investors or by you European investors. no So then this is kind of also another way to to think that maybe this is going to be diversification ah into some of these beaten up countries that didn't really have a ah lot of ah interest.
00:17:12
Speaker
What we observe very strongly today is flows, especially on the passive side, to into Europe. away from the US passive side into European passive side. And I guess the expectations are fueled by already depreciation of the dollar this year against Europe and also expectations that this potentially, the factors that are behind it are still there.
00:17:33
Speaker
So potentially there there could be a bit more of a depreciating factor. The fact that European ECB, European Central Bank stopped or announced that they're stopping ah adjustments to their monetary policy and whereas the expectation that FED is going to do still two more cuts starting, we believe, in September, probably also fueling that expectation that we're probably going to see a lot more stable and interesting depreciating appreciating opportunity for European assets.
00:18:00
Speaker
um So i think that's what we're seeing a lot. Maybe in the emerging markets it's not as pronounced, but European markets are very clear trend. Excellent. Going back to your role and your institution, i mean, lots to navigate through in this global context.
Amundi's Asian Ventures
00:18:16
Speaker
You know, things change almost on a daily basis.
00:18:19
Speaker
So what's the Amundi strategy going towards the rest of the year? How do you navigate this landscape? We as a company see a significant growth opportunity from the asset management industry perspective in Asia.
00:18:30
Speaker
This is ah about demographics, this is about the patterns of investing, so we're starting to move and invest a lot more into our capabilities on the Asian side, and I'm sure that you are also have built this capability in a significant way.
00:18:45
Speaker
So I think the this is what we're we're looking at, the opportunity to really ah ah improve and our setup and invest more into Asia. ah This could be going directly, going to these countries and setting up our businesses, or could be through joint ventures. To give an example, we have a joint venture that we ah formed in India um almost and now, it's the third decade of our partnership with the SBI, State Bank of India, and now today and it used to be about three, four hundred million ah when we set it up.
00:19:16
Speaker
Back then, today it's three hundred billion. and under under management. So it's a significant contributor to the bottom line of Amundi as a joint venture. So we built this kind of joint ventures across different markets and I think this is going to proliferate, especially also given that growth opportunity now is in GCC. We're also looking for opportunity to build some of the partnerships in the region. So I'm not going to give names, but I think we're working on it. It was part of my mission when I was also in in the Middle East.
Focus on Sustainable Finance
00:19:44
Speaker
um The other big theme that we're playing is, ah as you we discussed it in the past as well, HSBC has been very much committed to sustainable finance in the emerging markets. And I think we have been also one of the players in this market, as you know, as we discussed many, many times. And I think what we have seen also as a trend, going back to your previous question, that a lot of reallocation is start starting to happen from, say, even the US institutions.
00:20:09
Speaker
ah towards towards ourselves or institutions with very strong credentials in sustainability financing. Of course we know there's some of the setbacks if you think about US big asset management companies that they started to roll back some of their promises and commitments on the on the environmental and climate side. so I think were we're seeing that being a major factor, you know, to to name a few opportunities we have had a ah significant opportunity from UK pension fund that moved away from the US s asset manager and awarded Amundi with with a mandate specifically because the sustainability commitments have been effectively removed by the
00:20:50
Speaker
the previous asset manager and whereas they saw that we are pretty much on course. So i think this is going to be also a very important part of the emerging market business where we're looking at opportunities in Saudi Arabia, we're looking at opportunities to invest in in broader region into um hydrogen production, into sustainable a sustainable ah energy we're looking at to finance solar energy in the region as well. So I think there's a significant amount of opportunities for us to channel investors' money at the time when we're all going through a very challenging times on the sustainability side, given that lack of commitment of certain players
00:21:30
Speaker
And I think this is the time for us to step up and I hope HSBC is going to help us as well to channel those investments into emerging markets in in sustainability ah investments and financing opportunities.
00:21:42
Speaker
Fantastic. So a very busy rest of the year for you.
Conclusion: The Future of Emerging Markets
00:21:46
Speaker
And Jalan, this is a fascinating conversation, very insightful. And I think it's fair to say that the name of the game in the global investment environment is uncertainty.
00:21:55
Speaker
But emerging markets are firmly on the map for investment opportunities, a constructive view I think both you and I share, and we'll be also looking for opportunities around the emerging market landscape. So thank you very much for joining us. I really totally enjoyed it, and this was super helpful and very informative.
00:22:14
Speaker
So ladies and gentlemen, I had my distinguished guest today, Yarlan Sizdikov, Global Head of Emerging Markets at Amundi. Really great discussion recording on the sidelines of GCC Exchanges Conference here in London.
00:22:27
Speaker
This was the latest on our podcast series on perspectives. Please stay tuned for the upcoming ones. And once again, Yarlan, thank you so much for joining. Thanks everyone. Thank you for joining us at HSBC Global Viewpoint.
00:22:40
Speaker
We hope you enjoyed the discussion. Make sure you're subscribed to stay up to date with new episodes.