China exporting deflationary forces to the world, says Fidelity

September 23, 2015 12:03
Emerging markets are struggling to transition to the next stage in their development, says Dominic Rossi of Fidelity Worldwide Investment. Photo: Fidelity

China is leading the emerging markets in exporting deflationary forces to the world, said Dominic Rossi, global chief investment officer of equities at Fidelity Worldwide Investment. 

The high-growth period in emerging markets that was seen over the past ten years is over, Rossi said, noting that the countries are all struggling to transit to the next stage in which they have to rely more on consumption than on exports and capital inflows for growth.

Given that the influence of emerging markets has become much larger, the depreciation of their currencies is likely to have a bigger impact on mature markets than before, he said, according to the Hong Kong Economic Journal.

Rossi expects the global bond market to suffer from a low yield curve in the coming years.

He advises investors to tap into stocks in sectors such as innovative technology, pharmaceuticals and emerging manufacturing.

Fidelity is of the view that mature market equities will outperform emerging market counters in near term. In the mature markets, US stocks are among its top picks.

In other comments, Rossi said he expects the upcoming high-level meetings between the US and China to touch upon issues such as liberalization of China's capital market and renminbi exchange rate.

The discussions could eventually pave way for some agreements that will benefit the financial markets, he said.

[Chinese version中文版]

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Hong Kong Economic Journal