Stocks in emerging markets will trade at a premium compared to equities in developed economies in as little as five years, an asset manager has said.
Marino Valensise, the chief investment officer at Baring Asset Management said emerging economies would continue to outperform established ones with stocks trading at higher prices.
“Emerging market equities are still not a consensus story despite the fact they currently account for 70 per cent of global GDP growth. The US is a perfect example of a region that has yet to fully recognise the outstanding investment opportunities on offer,” he said.
Valensise said emerging markets in Asia had outperformed the developed world by 186 per cent over the last 11 years, but some major investors, such as US pension funds, still had limited exposure to these areas of growth.
The average allocation to emerging equities by a US pension fund is one per cent, according to Barings. Valensise said that was likely to change as the ‘US wakes up to the returns on offer’.
“On a regional basis, we find ASEAN 4 interesting (Indonesia, Thailand, Malaysia and Philippines) as they are smaller and more inward looking markets based on domestic consumption, rather than those larger markets that are driven by exports and resources,” Valensise added.
Allianz launch Brazil fund
Commenting on the recent launch of a dedicated Brazil fund by Allianz Global Investors, Andy Parsons, advice team manager at The Share Centre stockbrokers said UK investors now had the opportunity to invest ‘predominantly in Brazil.’
“In terms of investor opportunity, the region is still seen predominantly as a play on commodities. However, it is the fifth largest country in the world, has favourable demographics, a buoyant middle class, rising employment and wages, and is currently the second largest destination within the emerging markets for foreign direct investment,” Parsons said.
The major emerging market economies, collectively known as the BRICs, are Brazil, Russia, India and China.
Parsons said the Allianz RCM Brazil fund is the first open ended investment company (OEIC) specifically investing in Brazil within the UK funds sector.
Manager of the fund, Michael Konstantinov, has described Brazil as ‘finally unleashing its potential’ in commodity markets through its large domestic economy – the dominant driver for economic growth in the country.
© Fair Investment Company Ltd