Emerging markets performed well during the Iran war; institutions such as BlackRock say traditional investment strategies are outdated

Glonghui, May 11 — Judging from the Middle East crisis that has lasted for more than two months, the traditional strategy of selling emerging market assets under market pressure is no longer a foolproof defensive trade. Emerging markets have long been regarded as one of the riskiest asset classes, but they performed unexpectedly well during the Iran war. Since the beginning of this year, emerging market stocks have risen by more than 20%, which is more than triple the increase in the S&P 500 Index. Emerging market currencies are at historical highs, and the yield premium over developed market bonds has remained stable. Investors at BlackRock, PGIM, Danske Bank, and Robeco say this is part of a broader trend, noting that the asset class has fundamentally changed: governments are increasing foreign exchange reserves, and increasingly sound institutions and policy-making are helping absorb market shocks. Meanwhile, policy shifts driven by Trump and the pressure faced by the Federal Reserve have shaken investors' confidence in the safety of US assets, prompting them to seek alternative investment targets.