The COVID-19 pandemic began in China before spreading to Europe and North America. While Europe and North America were the first to suffer severe outbreaks outside of China, several emerging markets have seen a significant increase in case load and deaths in June and July. These outbreaks are especially dire because these countries don’t have as well-equipped public health systems or access to healthcare.
The latest case load data, as of July 23, 2020, include:
- Russia’s case load reached 15.3 million with 624,000 deaths.
- Brazil’s case load hit 2.23 million with 82,890 deaths.
- South Africa’s case load reached 395,000 with nearly 6000 deaths.
- India’s case load reached 60,000 with nearly 2,900 deaths.
The combination of worsening domestic conditions and reduced export demand for emerging market goods, namely commodities, has pushed equity valuations to extreme lows. For example, Morgan Stanley found that emerging market equities were about 44% below their long-term nominal return trendline, representing a two standard deviation low only matched during the 1980s and the 2001/2002 recession.