How are vaccine programmes progressing in emerging markets?

The roll out of Covid-19 vaccines remains a conundrum facing investors in emerging markets (EM). As we noted late last year, few EM were proactive in securing sufficient supplies of effective vaccines. So they were always going to lag behind developed markets in the roll-out of shots and subsequent reopening of economies.

While some EM such as Chile and those in Central Eastern Europe (CEE) had secured decent supplies of shots, most had not.

Which emerging markets lead/lag in the vaccine roll out?

As the chart below shows, there is now a substantial difference in the proportion of populations that have received at least one dose of Covid vaccine across EM. So while Chile and the CEE countries have now vaccinated a decent proportion of their population, many have not.

Indeed, a combination of slow roll-out and vaccine scepticism means that vaccination rates remain stuck in single digits in many EM, including South Africa, South Korea and many other parts of Asia.


Most estimates have placed the threshold for herd immunity to Covid-19 at 60-70% of the population having protection; either after surviving exposure or through vaccination. A quick back-of-the-envelope calculation shows that, at current vaccination rates, some of these markets will not manage to deliver at least one shot to two-thirds of the population until late 2022 and beyond. Indeed, at current rates it would be several years until South Africa and Taiwan achieved the feat.

The pace of inoculation will probably speed up as more vaccines are approved. And there are signs that, having initially hoarded shots, some developed markets such as the US will now start to release stock. This should help to boost supply, albeit this is tempered by disruptions to exports of vaccines from India.

It should also be noted that some EM have built up significant natural immunity after suffering large waves of Covid outbreaks. That might dampen the reliance on vaccination in EM such as India, Mexico and South Africa.

However, for those EM that dealt with Covid through suppression, and therefore built up little natural immunity, vaccination is key to protecting the population. The slow pace of roll-out therefore leaves them vulnerable to new outbreaks and variants. This means that EM with low vaccination rates are at risk of periodic lockdowns that would disrupt economic activity. In addition, these economies may find it difficult to fully re-open to international business and tourism travel.

What does this mean for investors?

From the perspective of investors, this is important. Our analysis shows a clear correlation between the speed of vaccination and expectations for future economic growth. And this should have an impact on the performance of local financial markets.

There is some evidence that financial markets underperform in EM that suffer large outbreaks of Covid. For example, equities in Brazil started to underperform the rest of EM as it became apparent that a second wave of infections was underway, before starting to outperform as investors began to anticipate the peak in the outbreak.


This helps to explain the recent negative reaction in Taiwanese financial markets after the local outbreak of Covid in recent weeks. And it underlines the point that vulnerability to renewed activity restrictions is something that will continue to require careful monitoring across EM in the months ahead.