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Headlines like “Trump Tariff Barrage Pushes China Feud to Point of No Return,” and “China Vows Retaliation Against $200 Billion Trade Threat” are just the latest portents of global investing in peril. Everyone from BlackRock, the largest public money manager, to Harvard University economist Carmen Reinhart seems to be issuing warnings about the perils of investing in emerging-market economies, which appear to be in worse shape now than they were during the 2008 financial crisis.

Except they’re not. Even as tariff threats escalate and money flees from emerging markets at the fastest rate in three years, the people who invest only in countries lacking the accounting standards and securities regulation of Europe, Japan and the U.S. are doing fine. The best of them are providing annual total returns (income plus appreciation) approaching 15 per cent and leading their peers by making China their single biggest holding. That’s partly because the No. 2 economy increasingly is becoming more like the No. 1 economy as domestic demand defines the companies driving China’s growth.

That fact reduces President Donald Trump’s trade war to a side issue as far as the savviest investors are concerned.

“If you look at the portfolio – and I have been leading it for nine and a half years – we’ve always had a big exposure to consumer names and always been driven from within the countries, not exporters,” said Patricia Ribeiro, who manages the American Century Emerging Markets Fund, which outperformed the vast majority of her 138 rivals the past 12 months with a total return of 15 per cent, according to data compiled by Bloomberg. “That’s been very helpful in certain times like now,” she said about her fund, a mainstay among the top 10 per cent in the category since 2015. “Certainly we saw that in the Chinese market at the time and we started adding to Chinese stocks. The vast majority is domestic demand or internet. The exposure that we have to exporters is very small.”

American Century almost doubled its China holdings to 28 per cent from 16 per cent two years ago as consumer-discretionary and information-technology companies based in the mainland and Hong Kong accounted for a growing share of the fund’s appreciation since then. Driehaus Emerging Market Growth Fund and William Blair Emerging Market Growth Fund, which round out the industry leaders during the past 12 months with total returns of 14.6 per cent and 14.4 per cent respectively, share similar strategies. China accounts for 28 per cent and 30 per cent, respectively, of the Driehaus and William Blair funds, up from 18 per cent and 17 per cent in 2016, according to data compiled by Bloomberg.

American Century’s Ribeiro said that “the magnitude of the growth of demand” is exceptional. “There are stocks we bought two years ago where the market cap” increased to $30 billion from $5 billion. “We’re not talking about 5 per cent or 10 per cent growth, which in some markets is significant. We’re talking about 100 per cent or 180 per cent growth one year over the next. We joke that when the Chinese discover something, it’s just unbelievable how quickly it grows.”

While Trump and his advisers castigate China for undermining U.S. manufacturing with cheaper exports, the 10-year trend shows a Chinese economy increasingly focused on domestic consumption. That’s reflected in the tripling market capitalization of consumer discretionary companies listed on the Shanghai Stock Exchange, to 10 per cent from 3 per cent, and the more-than-doubling of the weighting of consumer staple companies to 8 per cent from 3 per cent. Information technology companies now account for 6 per cent of the index, a sixfold increase, according to data compiled by Bloomberg.

To be sure, emerging markets continue to be buffeted by Trump. Vanguard’s FTSE Emerging Market Exchange Traded Fund, the largest ETF investing in emerging market equities, suffered a 1.9 per cent outflow during the second quarter, the most for any quarter since 2015.

For her part, Ribeiro of American Century said she doesn’t expect to change her investment strategy.

“That doesn’t mean we’re not going to see and hear a lot of noise in the markets and see volatility because markets react to what’s said,” she said in an interview earlier this month. “Markets are volatile for a period and then they correct – that for me is the difference. So the focus for me is on the fundamentals, not on the noise.”

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