Panel SA: BlackRock remains cautious in the face of emerging markets when reviewing the global scenario

The world’s largest investment manager, BlackRock continues to carefully watch emerging markets such as Brazil, according to a new report in which it analyzes the prospects for the next year and reviews its recommendations for investors, which will be released on Monday (13).

​The company, which manages US$ 9 trillion in investments, remains optimistic about the situation in China, but maintains a neutral recommendation for shares in other emerging markets and debt securities issued by companies and governments in these countries to raise funds on the foreign market.

BlackRock points to favorable prospects for fixed income investments in domestic markets, with a moderately positive recommendation. For the company, rising interest rates in places like Brazil will make corporate and government bond yields more attractive.

​Axel Christensen, BlackRock’s chief strategist for Latin America, says that most emerging markets are slowly recovering from the effects of the coronavirus pandemic and this hurts his companies’ growth prospects by inhibiting equity investments.

“Countries that were already in a more fragile situation before the pandemic did not have the same capacity as the more advanced ones to deal with unemployment and other issues, and are now coming out of the crisis with permanent scars and new problems, such as high inflation”, says Christensen .

BlackRock predicts that the return provided by fixed-income investments as interest rates rise in countries like Brazil will remain attractive even if the Federal Reserve, the central bank of the United States, also starts to raise interest rates next year to contain inflation.

“Investors expect a consistent income stream from fixed income and care less about growth,” says Christensen. “The rates offered by countries like Brazil, Colombia and Russia are very attractive and seem to offset the risks involved.”

The uncertainties created by the presidential elections and the weakening of the mechanisms for controlling public accounts in Brazil are less of a concern, according to the BlackRock strategist. “Election cycles are part of the scenario and much of the political risk is already in the price”, he says.

For Christensen, in the long run, the most important thing for investors will be the return of economic growth. “Projections for Brazil next year are very modest,” he says. “Apart from the electoral cycle, what matters to them is to know how the country will resume a path of growth.”

With Ricardo Balthazar (interim), Andressa Motter e Ana Paula White​.