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There was a substantial decline in Q2 earnings but they turned out to be better than expected; their decline being ultimately less pronounced than during the Great Financial Crisis (GFC) of 2008-2009, whereas the current recession is much more severe. This surprising resilience is due in large part to sector aspects. Financial stocks have generally proved more resilient than during the GFC. Furthermore, the Healthcare and Technology sectors have emerged remarkably unscathed. The other side of the coin is that, without these last two sectors, the decline in earnings would have been much more pronounced. Given the revisions made and the achievements in H1, barring a new general lockdown episode, most of the consensus adjustment seems to be behind us. However, the valuation debate - excessive or not - is still far from being resolved. The duration of the crisis will be the key parameter in responding to this question.
The global outbreak of Covid-19 has brought the world and its economy to a standstill, highlighting the importance of sustainable and resilient infrastructure (healthcare, water, power, telecommunications). Countries with fragile infrastructure have less capacity to handle crises, so they will need to increase their infrastructure investments. This is especially crucial in the context of health security and rapid urbanisation.
Global Head of EM
Two major drivers are shaping the landscape for EM countries: Covid-19 and oil dynamics. We are mindful that current events will have very significant negative effects on the economic outlook for EM this year, leading many countries into recession. However, for those experienced in financial markets, shocks are nothing new, particularly within EM.
Global Head of EM
Financing countries’ climate and sustainable development commitments will require global investment on an unprecedented scale. IFC estimates cumulative climate investment potential of $29.4 trillion across six key sectors in emerging market cities through 2030. These sectors include waste, renewable energy, public transportation, climate-smart water, electric vehicles, and green buildings.2 Institutional investors, multinational corporations, and financial institutions are mainstreaming environmental concerns into their investment strategies and business activities. Debt capital markets are crucial sources of long term funding to help close financing gaps and mobilize capital for sustainable development.
Yerlan SYZDYKOV, Jean-Pierre LACOMBE
Over the last few weeks, significant stabilisation plans have been announced across advanced economies and in addition true stimulus plans are now under consideration. Recent empirical studies show that fiscal multipliers could be much larger in the current depressed context than during normal times. We believe this could boost the recovery path of corporate dividends going forward, in Europe in particular.
Didier BOROWSKI, Pierre BLANCHET, Alessia BERARDI, Delphine GEORGES
After the first wave of the Covid-19 outbreak in China and East Asia, and the second wave in Western Europe and North America, a third wave now looks to be building in several EM and frontier countries.
Yerlan SYZDYKOV, Alessia BERARDI, Abbas AMELI-RENANI