Emerging markets: demographics and domestic demand key in 2011 Go compare with our comparison table

Emerging markets: demographics and domestic demand key in 2011

13 December 2010 / by Paul Dicken

Attractive opportunities in emerging markets could lead to another positive year for equity investors in 2011, according to Barings asset managers.

Chief investment officer at Barings, Marino Valensise said interest rates across the world were at historical lows, with risk assets like equities continuing to compare favourably against government bonds.

Although rates are at a 0 to 0.25 per cent range in the US and one per cent across the Euro area, interest rates in Australia – where the economy has not suffered a recession – are 4.75 per cent.

“Overall, we expect 2011 to be another good year for equities. The industrial sector is showing strong profits, balance sheets in the quoted sector [companies listed on stock exchanges] are strong, companies are generating record levels of free cash flows and corporate debt markets are open for businesses,” he said.

Valensise said some better returns were potentially available in smaller inward looking countries ‘based on strong demographics and growing domestic consumption’ as oppose to economies driven by exports and resources.

Barings cites Indonesia as an example, as well as other countries in the Association of Southeast Asian Nations (ASEAN).

Valensise also believes there is little risk of a bubble in emerging markets, as retail investors have increased exposure but institutional investors are less heavily invested, pointing to research showing that a typical US pension plan has only one per cent exposure to these markets.

On commodities, Barings believes investing in agricultural stocks is attractive, as emerging markets are likely to see increased consumption of proteins as economies develop, and there is rising demand for corn, soybean and wheat.

© Fair Investment Company Ltd

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