Scott Berg
Asian share markets will take some time to return to last year’s highs, a US global equity manager has warned.
Apart from overseas investors, the new middle class in Asia have also been serious investors in their own markets and have been burned, T. Rowe Price global equity associate portfolio manager Scott Berg said.
A lot of people have lost a lot of money investing in Asia,” he said.
“When you have a whole generation getting burned, markets such as China A shares, are unlikely to come back to previous levels quickly.”
But Berg said the middle class continues to grow in Asia and there will be new investors entering the markets who enjoy better returns in the short term.
While markets are not rebounding immediately, he is still positive on the Asian growth story due to continuing consumerism by the middle class.
“There is still more of the middle class buying mobile phones and other consumer goods to drive the economies,” he said.
“It is still a positive outlook for Asia despite inflation running at between 8 to 9 per cent in countries like China.”
The demographics of the world labour force are also favouring emerging countries.
According to the fund manager, the working population of emerging markets continues to grow while developed countries remain static.
“The growth of the labour force (in emerging countries) will provide economic growth in those countries,” Berg said.
“Industry in emerging markets has inefficiencies so there will be productivity growth that will drive returns for investors.”
In emerging markets there will be an estimated workforce of 3.5 billion in 2020 compared to less than a billion in developed countries.
These new markets have a high percentage of young people who will be entering the workforce in the next five years.
Brazil has 25 million people under 15 and China 20 million. This compares to 14 million in Japan and 13 million in the UK.
“There are fewer people working in developed markets, which will make it harder to grow the economy,” he said.
“The younger population in emerging markets will be less of a burden to the economy.”
