Should you be going back to emerging markets?

For a while, it’s seemed like “emerging markets” has been a bit of a dirty phrase; a lot offshore dollar debt has found its way in and, as an added worry, China has been slowing.

The emerging market story started in the 1980s, when the Chinese economy opened up cheap manufacturing to the US consumer. Emerging markets continued to grow until the global financial crisis of ’08, which forced them to become more focused on domestic consumption. Now, they are all about the consumer.

With emerging markets being driven by a dovish Fed, and oil prices finally stabilising, have the challenges made way for opportunities? What do the experts on have to say?

going back to emerging markets

Kunal Ghosh, AllianzGI, gives his outlook on emerging markets and why we should be more confident that returns will be better than what we’ve seen in the recent past:

Three things come to mind:

  1. The valuation, which is extremely cheap - as cheap as going back to the 2009 financial crisis valuation;

  2. Second, the companies in emerging markets are showing exceedingly better ROIs than they have in the last 5 years;

  3. Most importantly, we are seeing earnings revisions come back in emerging markets, and that’s what’s going to bring investors back.

That’s why 2016 is the most appropriate year to go back into emerging markets.

Watch the video here

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Ian Smith, AXA IM

The general outlook for emerging markets seems to be on the up but China does play an all too crucial role and opinions surrounding its transitioning economy are mixed. Ian Smith, AXA IM, says:

The market almost has a sort of bipolar view on China. There’s a big group of people that have a very sanguine
view; they see the problems all emanating from 2009, when we got excess
investment and stimulus, and now we’re having a very gradual slowdown in growth. Ultimately,
the problems are being addressed and really we shouldn’t worry about China. On the other side
of the spectrum, you’ve got investors who are predicting an impending financial crisis, warning
that we shouldn’t touch China with a bargepole. In our opinion, both views are completely wrong.

Watch the full video here