As uncertainty looms over President Donald Trump’s second term, investors are increasingly turning to selective trades in emerging markets that are insulated from US trade policies, interest rate fluctuations, and dollar strength.
From China’s artificial intelligence sector to Dubai’s property boom and Latin America’s evolving economic landscape, these investments are designed to withstand Trump’s tariff threats and economic unpredictability.
Resilient Sectors and Markets
While emerging market stocks, bonds, and currencies had a strong start in early 2025, a late-February sell-off signaled continued volatility due to Trump’s aggressive trade stance. However, certain markets and industries remain attractive:
AI Boom in China: Investors have pivoted from Taiwan Semiconductor Manufacturing (TSMC) to Alibaba, which has surged 55% this year. Alibaba’s strength lies in its focus on China’s domestic AI market, making it less vulnerable to Trump’s tariffs.
Middle East Stability: Nations with strong currency pegs and government-backed companies, such as the UAE, Saudi Arabia, and Qatar, provide safe-haven investment opportunities. Dubai’s benchmark index hit a record high in February, driven by expatriate demand.
Latin America’s Strength: Brazil has emerged as a preferred investment over Mexico due to its lower trade exposure to the US and potential interest rate hikes. Meanwhile, Venezuela’s defaulted bonds are recovering as debt restructuring hopes rise.
Eastern European and Southeast Asian Beneficiaries: Countries benefiting from shifting global trade flows and new domestic credit cycles are on investors’ radar.
Currency and Bond Strategies
To counter a strong US dollar, investors are focusing on:
Local-currency bonds: High-yielding currencies like Brazil’s real, Mexico’s peso, South Africa’s rand, and Turkey’s lira are seen as undervalued, offering attractive carry trades.
Stabilized currencies: The UAE dirham’s peg to the US dollar shields investors from FX risk, making UAE stocks an appealing choice.
Caution Amid Optimism
While these investment strategies have performed well in early 2025, risks remain. A late-February sell-off underscored the fragility of emerging market positions in response to tariff escalations.
“This is a storm that no one will be completely immune to,” warned Charles Diebel, head of fixed income at Mediolanum International Funds. Investors are advised to stay selective and agile in their emerging market bets.
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