Investors look to emerging markets for tariff-safe assets

Investors seek assets safe from US tariffs: As US President Donald Trump’s tariff agenda continues to loom large, investors are looking to emerging markets as an option to hedge their investments safely away from developed markets threatened with trade levies, Bloomberg reports. Countries non-reliant on trading with the US — and with strong domestic stories and benchmark indexes — are now seen as a safer investment.

Different economies offer various domestic market strongpoints. China’s recent AI market disruptor DeepSeek, which rattled US tech stock earlier this year, triggered an investment surge in domestic companies using homegrown AI software. Dubai’s foreign worker influx boosted its benchmark index to a record high in February, while Latin American countries like Brazil are stepping in as alternatives to trade originally coming from Mexico.

Stable emerging economies pegged to the greenback are especially attractive as they enjoy the security that comes with a strong USD peg without being exposed to any foreign exchange risk, the business news information service quotes Cheyne Capital’s Carl Tohme as saying. The UAE, Saudi Arabia and Qatar were identified as prime examples. Government backing in many of these markets also provides another layer of security, it said.

This has been going on for a while: January saw “an emerging market buying spree,” with portfolio flows to emerging markets hitting USD 35.4 bn — the majority of which came from debt flows, signaling “investor preference for the relative stability of fixed-income instruments amid persistent geopolitical uncertainty, US monetary policy risks, and global economic headwinds,” according to an Institute of International Finance report cited by Reuters earlier this year.

This comes in stark contrast to European markets which recently took a hit after Trump threatened a 25% levy on EU imports, targeting vehicles specifically, the Financial Times reported. Major auto manufacturing players including Volkswagen and Ferrari saw their stock fall by up to 7.9%.

However, this reorientated focus isn’t completely foolproof — emerging market assets saw a slump at the end of last month, an indication that even those assets are not immune to the impacts of a potential tariff escalation, Bloomberg said.

MARKETS THIS MORNING-

Asian markets are in the green this morning, with Japan’s Nikkei leading gains at 1.09%, and Hong Kong’s Hang Seng trailing closely with a 0.65% rise. South Korean markets are closed for a public holiday. Meanwhile, on Wall Street, futures are up slightly as investors await more clarity on the US’ tariff plans this week.

THE CLOSING BELL-

The EGX30 rose 0.8% at yesterday’s close on turnover of EGP 2.6 bn (27.6% below the 90-day average). Local investors were the sole net buyers. The index is up 3.8% YTD.

In the green: Fawry (+4.4%), Egypt Kuwait Holding -EGP (+3.3%), and Orascom Development (+3.2%).

In the red: Juhayna (-1.6%), Edita (-1.6%), and Oriental Weavers (-1.4%).

CORPORATE ACTIONS-

Faisal Islamic Bank will distribute a dividend of USD 0.06 per share for shares issued in USD and EGP 3.0503 per share for shares issued in EGP for its 2024 earnings, according to an EGX disclosure (pdf).

Middle East Glass Manufacturing’s board approved a proposal to distribute EGP 409.6 mn in dividends for its 2024 earnings at EGP 6.54 per share, according to an EGX disclosure (pdf). The proposal is pending final approval by the company’s ordinary general assembly.