Outlook 2010: Emerging Markets to lead the recovery

Outlook 2010: Emerging Markets to lead the recovery
Investors who held their nerve have seen great returns as emerging economies continue to out-perform their developed counterparts. We ask those in the know whether 2010 offers the same investment opportunties?

Compiled by Emma Wall
Published: 3:58PM GMT 15 Dec 2009

India's vibrant economy has produced a 250m-strong middle class Photo: HEATHCLIFF O'MALLEY

When The Association of Investment Companies (AIC) asked investment company fund managers to tip their top performing region for 2010, emerging markets came top with 35pc of the vote. Second and third were also sectors that can be included in the emerging markets umbrella- Latin America and the Far East excluding Japan respectively with 22pc and 18pc of the vote.

Dr Slim Feriani, chief executive of Advance Emerging Capital and manager of Advance Developing Markets said: “The performance of emerging market equities has handsomely outpaced that of developing markets in the past five years and we expect that outperformance to continue over the next five years.


Emerging countries have emerged as the “relative winners” from the subprime crisis and resulting recession for two prime reasons: the quality of their sovereign and household balance sheets has never looked so strong compared with developed countries as it does currently; and their economic and corporate earnings growth is and will continue to easily outstrip that of the developed world in both real and nominal terms for the foreseeable future."

Following Schroders’ annual outlook for 2010 media presentation, Alan Brown and Keith Wade predicted that the current global rally is likely to continue into 2010 with emerging markets leading the economic recovery. However, they warned that there are a number of potential monetary and economic factors that could derail the global recovery.

To protect against these, Schroders recommended a more dynamic approach to asset management involving greater diversification and flexibility in order to protect clients’ portfolios.

Close Asset Management believe that emerging markets here to stay. "The growing strain on Western consumers and government finances are likely to be reflected in weaker macroeconomic data and pressure on revenues for many years to come," said Stuart Dyer, head of distribution for Close. "Equity market valuations do not look well underpinned in an environment of low or faltering growth.

For investors seeking long-term growth emerging markets are likely to look increasingly attractive and we are already seeing a sea-change in risk attitudes to investment in these markets; expect this to continue and exposure to these markets to increase."

Fidelity International's Mr Teera Chanpongsang, portfolio manager for their India Focus Fund and Emerging Markets Fund agreed. He said that emerging markets would continue to offer strong long term investment opportunities and stable governments and developing industry will fuel growth.

He said: “Early signs of a recovery are visible in recent economic indicators and earnings upgrades. The region has one of the strongest GDP growth rates in the world, driven by favourable demographics and healthy population growth, which means more people are added to the region’s work force."

http://www.telegraph.co.uk/finance/personalfinance/investing/6817246/Outlook-2010-Emerging-Markets-to-lead-the-recovery.html