“The current stand-off in Hong Kong will accelerate growth softening in China and on the economies of surrounding countries like Indonesia,” said Kevin Daly, an emerging market debt manager for Aberdeen Asset Management.
Mike Zelouf, manager of an unconstrained fixed income fund for Legg Mason, urged the audience to see 
the protests in Hong Kong in a wider context. “It’s a symptom of a bigger secular theme that’s going on across emerging markets. During the last 10-15 years large chunks of the population in the emerging markets have been lifted out of lower incomes into the middle class,” he said. As a consequence, people have become more demanding, for example with regards to education, healthcare and social security.
“This implies a shift in growth models which hasn’t actually happened yet. Eventually this will translate in more fiscal spending, affecting the credit ratings of these countries,” Zelouf concluded.
Putin: a red flag for investors
As concerns Russia, involved in another major conflict within the emerging markets, we need not wait for a game-changer as, first with its invasion of the Crimea and then by backing separatists in Eastern Ukraine, Vladimir Putin has already delivered on that.
“We had to sell Raifeissen Bank when the conflict there broke out, because it has a lot of business in both Ukraine and Russia. We have to exclude stocks with too much exposure to the region at the moment, as we don’t know what Putin is going to do,” said Jürgen Heinz, European small cap equity manager for Allianz GI.
Daly from Aberdeen took a similar line. “We went very underweight Russia shortly after the Crimea invasion, but from a valuation point of view we would like to increase our position again. However, the big question mark is the policy of Mr Putin.”
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