Fund Monitors Pty Ltd
© Copyright 2023
Printed: 02 December 2023 3:34 AM


4 Oct 2022 - Which Emerging Markets look good? Hint: look for tourists

By: Pendal

Which Emerging Markets look good? Hint: look for tourists


September 2022

WHEN investing in Emerging Markets, consider going where the tourists go.

That's the message from Paul Wimborne, who co-manages Pendal's Global Emerging Markets Opportunities Fund.

For Paul and his EM team, investing starts at country-level - which means a lot of time spent sifting through national data before deciding where to invest.

One of the best indicators of the health of a country is its tourism levels, he says.

A strong tourism sector creates jobs, boosts local economies, adds to government revenue and foreign exchange earnings, as well as improving the cultural exchange between countries. It signals opportunities for investors in emerging markets.

This is borne out by comparing the tourism sectors in Mexico, one of the better performing emerging economies, and Thailand, says Wimborne.

Both countries rely on tourism and facing similar challenges - reduced capacity among airlines, airport chaos as operations ramp up again, and rising oil prices.

But there is pent-up demand internally and externally, post-Covid lockdowns.

The outlook for the two countries is very different.

"The best tourism news is coming out of Latin America, and particularly Mexico," Wimborne says. "Passenger traffic is already back to pre-COVID levels in Mexico. That not really a surprise when you consider that tourism in Mexico depends on the United States consumer.

"In the US, consumer confidence is pretty good along with employment conditions. Extrapolating the tourism sector, Mexico is the bright light within emerging markets."

In contrast, many Asian economies, reliant on China, are struggling to re-emerge from the COVID pandemic.

"If you take Thailand, there were just over 3 million visitors in June 2019, before the pandemic. Pre-COVD tourism contributed about ten per cent of GDP. In June this year, there were just 800,000 overseas tourists," Wimborne says.

"The missing tourists are mostly from China and other Asian countries. That's because many Asian countries, including China, are trying to minimise the effects of COVID, and are following zero-COVID strategies. Outbound tourism from China is essentially zero."

There are emerging economies between Mexico and Thailand whose tourism markets fall in the middle.

"In Turkey, visitor numbers are just below the record level set in 2019. In Dubai, numbers are at 85 per cent of pre-COVID levels," Wimborne says. There is a geographic trend in the health of emerging economies' tourism markets.

"As you move east from Latin America through the middle east, and then into Asia, tourism markets worsen. In essence, Chinese tourists are the key lagging factor in international tourism recovery.

"Countries like the Philippines, Malaysia and particularly Thailand because of its reliance on tourism, are going to lag emerging markets in other regions. It's going to take longer for some countries in Asia to recover, than in other parts of the world."

Author: Paul Wimborne, Senior Portfolio Manager and Co-Manager

Funds operated by this manager:

Pendal Focus Australian Share FundPendal Global Select Fund - Class RPendal Horizon Sustainable Australian Share FundPendal MicroCap Opportunities FundPendal Sustainable Australian Fixed Interest Fund - Class RRegnan Global Equity Impact Solutions Fund - Class RRegnan Credit Impact Trust Fund

This information has been prepared by Pendal Fund Services Limited (PFSL) ABN 13 161 249 332, AFSL No 431426 and is current as at December 8, 2021. PFSL is the responsible entity and issuer of units in the Pendal Multi-Asset Target Return Fund (Fund) ARSN: 623 987 968. A product disclosure statement (PDS) is available for the Fund and can be obtained by calling 1300 346 821 or visiting The Target Market Determination (TMD) for the Fund is available at You should obtain and consider the PDS and the TMD before deciding whether to acquire, continue to hold or dispose of units in the Fund. An investment in the Fund or any of the funds referred to in this web page is subject to investment risk, including possible delays in repayment of withdrawal proceeds and loss of income and principal invested. This information is for general purposes only, should not be considered as a comprehensive statement on any matter and should not be relied upon as such. It has been prepared without taking into account any recipient's personal objectives, financial situation or needs. Because of this, recipients should, before acting on this information, consider its appropriateness having regard to their individual objectives, financial situation and needs. This information is not to be regarded as a securities recommendation. The information may contain material provided by third parties, is given in good faith and has been derived from sources believed to be accurate as at its issue date. While such material is published with necessary permission, and while all reasonable care has been taken to ensure that the information is complete and correct, to the maximum extent permitted by law neither PFSL nor any company in the Pendal group accepts any responsibility or liability for the accuracy or completeness of this information. Performance figures are calculated in accordance with the Financial Services Council (FSC) standards. Performance data (post-fee) assumes reinvestment of distributions and is calculated using exit prices, net of management costs. Performance data (pre-fee) is calculated by adding back management costs to the post-fee performance. Past performance is not a reliable indicator of future performance. Any projections are predictive only and should not be relied upon when making an investment decision or recommendation. Whilst we have used every effort to ensure that the assumptions on which the projections are based are reasonable, the projections may be based on incorrect assumptions or may not take into account known or unknown risks and uncertainties. The actual results may differ materially from these projections. For more information, please call Customer Relations on 1300 346 821 8am to 6pm (Sydney time) or visit our website

Australian Fund Monitors Pty Ltd
A.C.N. 122 226 724
AFSL 324476
Email: [email protected]