Global recovery favours emerging markets

AMP head of strategy and chief economist Shane Oliver says while emerging markets are generally out of investor favour, the asset class is geared to the global economy and is beginning to climb again as global economic confidence grows.

“I think it [emerging markets] started to improve last year out of the September lows in global equities, and as confidence grows Asia may outperform next year,” he says.

And Oliver says the recent devaluing of the currency in Argentina could even assist in a return to popularity for Latin American emerging markets.

“The devaluation of the peso was a crisis in slow motion, but now that it is out of the way the downside to investors, and fear of investing, has lessened somewhat because devaluation reduces the risk,” he says.

The Asian market, particularly Korea, look good to Oliver because Korea is more diversified than Singapore and Hong Kong. He says Eastern Europe remains a mixed bag but usually lags behind the US six months so it should stabilise by the end of the year.

“Everyone’s been quite scared, so you see a retreat to safe havens,” he says.

“Then investors, once confident in their own economy, start to look abroad and see if they can get better returns offshore.”

—Nicole Szollos