A collapse in economic activity amid the Covid-19 pandemic and expectations of slowing loan growth, falling margins and rising bad debts have hurt near-term earnings forecasts for Brazilian financials. While the pandemic has weighed on their businesses in the short term, we see a low probability of a systemic banking crisis in Brazil. The pandemic could, in fact, have the unintended effect of boosting bank penetration in Brazil. Credit penetration in the country is below many other markets, signaling room to head higher in the coming years. Brazil’s central bank has also cut its policy interest rate to a record low, which reduces the cost of renegotiating or restructuring loans, and could be a catalyst for longer-term credit growth.

A rally in technology stocks and effective control of Covid-19 in the country drove Taiwan’s equity benchmark to an all-time high in July. Known for its research and development strength, Taiwan’s semiconductor industry is a global leader, with the island home to one of the world’s largest independent integrated chip manufacturers. Taiwan’s manufacturers are also at the forefront of the global push to move supply chains out of China, as rising tensions between the United States and China fuel demand for servers and chips not made on the mainland. The coronavirus pandemic is only expected to accelerate the shift to Taiwan, as more companies domestically and globally begin to re-evaluate China-dependent supply chains.

South Korea embodies much of emerging markets’ new realities; namely institutional resilience, improved economic diversification and the emergence of world-leading emerging market companies. In addition to standing out as illustrative of the aforementioned factors, South Korea is also an example in terms of its handling of the Covid-19 pandemic. As a major oil importer, South Korea has disproportionately benefited from lower oil prices, while also seeing little economic impact from the collapse in international travel due to its lower dependency on tourism. An export powerhouse, a number of South Korean exporters are of global importance, supplying hardware that enables the modern economy to function

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