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BlackRock upgrades emerging market stocks

An employee counts Thai one-thousand baht banknotes, left, at a Super Rich 1965 Co. currency exchange store in Bangkok, Thailand.
Dario Pignatelli | Bloomberg | Getty Images

Marking Wall Street's latest turn in favor of emerging markets, BlackRock said Monday it upgraded EM equities to overweight as the firm expects a stable U.S. dollar, low rates and a better outlook for growth.

"The most important part and what drives our [view on] the EM performance over the long term is the fundamentals, but you need to be aware of the sentiment around EM. Now both of them have aligned," said Gerardo Rodriguez, portfolio manager of the BlackRock Total Emerging Markets Fund.

He said BlackRock was encouraged in three areas where there had been concerns. For one, there are signs of stability after a sharp slowdown in China's economy. Commodities prices are no longer falling, and the U.S. has not edged closer to recession. Improving current account balances, appreciating currencies and attractive valuations provide fundamental support for investing in EM, Rodriguez said.