A continuation of the crisis in emerging markets will spell further pain for developed equity markets, Carmignac Gestion managers have said.
Carmignac Emerging Discovery manager Xavier Hovasse warned the close links between developed markets and emerging markets means the latter are crucial to growth, and could continue to damage market sentiment in the near term.
"If the emerging markets crisis continues the most likely scenario is developed markets will be hurt," Hovasse said.
The crisis in emerging markets - which has already seen government bond yields spike and sparked a sell-off in developed markets - is showing no signs of abating, with emerging market bond yields jumping to elevated levels.
The slowdown in China has been one of the major causes of the crisis, as the economic powerhouse re-balances its economy to focus on its own consumers, and away from a model reliant on investment from the government.
Carmignac remains positive China - the world's largest emerging market and second largest economy - is doing the right thing by re-balancing, however.
Global manager Frédéric Leroux said China’s government has a “clear policy” of taking the country into consumer mode which should boost global growth once again over the long-term.
“Transforming an investment-based economy to a consumer-led one may limit headline growth, but it means that growth will be sustainable, and will spin off into the rest of the world.”
