Boss of world’s largest asset manager is bearish on emerging markets

Boss of world's largest asset manager is bearish on emerging markets

BlackRock CEO Larry Fink. The corporation, which has almost $8tn (£6.2tn) in assets is the world’s biggest asset manager. Photo: Pedro Pardo / AFP via Getty Images

The CEO at BlackRock (BLK), Larry Fink believes that major macroeconomics trends will weigh down on emerging markets.

Fink said he is “pretty bearish on the emerging world” during an online event hosted by the Institute of International Finance, on Friday.

The corporation, which has almost $8tn (£6.2tn) in assets is the world’s biggest asset manager.

Speaking on the impact of the coronavirus crisis, the CEO said that the pandemic poses an extra burden on emerging economies and their health systems. “De-globalization is hurting the commodity-dependent countries and the group is more sensitive to effects of climate change,” Fink said.

He also highlighted the effects of climate change on finance and how its causing a relocation of capital, saying: “When we talk about climate change, and we think that’s a big issue and a reallocation of capital.”

Fink added: “Part of that reallocation of capital is movement out of the emerging world.”

The MSCI Emerging Markets Index, which measures the performance of large and mid-cap stocks across 26 emerging countries, saw a 0.5% increase this year.

Boss of world's largest asset manager is bearish on emerging markets
Cumulative MSCI index performance from September 2005 to September 2020. Chart: MSCI

On other trends that are hurting the market, the head of BlackRock noted that the lack of trust in emerging governments.

“We’re seeing a flip-flop of governments. One government could raise a lot of debt, new government comes in and (there’s) different behaviours, different attitudes, and it doesn’t create any confidence for the debt holders,” Fink said.

The rolling-year average demand reached 10-year record highs after a global rise in coronavirus cases forced many countries reintroduce tighter coronavirus restrictions to curb a second wave.

“The risk premium that you’re going to have to demand to invest in the emerging markets is growing persistently,” Fink told investors at the event.

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