The Federal Reserve is about to cut interest rates, highlighting the investment value of emerging markets.

Navin Hingorani, portfolio manager at Eastspring Investments in Singapore, said that with the increasing expectation of an upcoming interest rate cut by the Federal Reserve, combined with low local inflation and relatively low public debt, the emerging markets are becoming more attractive. Hingorani said: "Stock prices in emerging markets are 65% lower than in the US market. Therefore, we see investment opportunities in different markets and industries." He is currently looking for investment opportunities in the Philippines, Indonesia, South Korea, and Latin America. He added, "A key point is that real interest rates in emerging markets are still high - the current level is comparable to the highest level since the financial crisis. As the US enters a rate-cutting cycle, this will be very favorable for emerging markets." The market generally expects the Federal Reserve to cut rates next week. Previous data shows that job growth in the US slowed significantly in August, and the unemployment rate also rose to its highest level since 2021. Hingorani said that due to the continuous increase in public debt, political situations in developed countries from Japan to the US to France are becoming increasingly unstable. As a long-term investor, Hingorani stated that he can overlook the recent turbulence in Indonesia. The country has recently experienced its most severe unrest in years, and its finance minister, Sri Mulyani Indrawati, has suddenly resigned. Hingorani said: "We will not react until we fully understand the long-term impact of a short-term market event. Therefore, our views and investment allocations have not changed at the moment." He recalled participating in a survey on emerging markets at an investment forum held in Chile last year. "Political risk" dominated the survey, reflecting general unease as elections are approaching in many countries from Indonesia to South Africa, Mexico, and India. Now, the situation has changed. Hingorani said that in developed countries, politics is increasingly becoming a new source of risk as debt accumulates leading to budget constraints, and US President Donald Trump's continued pressure on the Federal Reserve exacerbates political uncertainty. Emerging market bonds seem to be more of a safe haven than bonds in developed markets. This is also reflected in asset prices. As of last Friday, the yield on 30-year government bonds in developed economies has increased on average by 16 basis points in the past month, indicating heightened investor concern, while the yield on long-term bonds in developing countries has risen by about 4 basis points. Stock markets also show a similar trend, with the performance of emerging market stocks surpassing US stocks for the first time since 2017. The International Monetary Fund predicts that the total debt of developing countries as a percentage of annual economic output is expected to be around 75% this year, while for the G7 developed countries, this ratio is around 125%. Indonesia's ratio is around 40%, and Vietnam's is only 33%, both significantly lower than worrying levels in some developed countries. This fiscal prudence has been reinforced by low inflation and adequate foreign exchange reserves. Reserves provide emerging market central banks with space to manage market volatility. Hingorani said: "People are gradually realizing that the view that emerging markets are often higher risk may not be accurate."