Shifting opportunities in emerging markets: GEAM

Despite short-term weakness present in emerging market indexes, there are a range of opportunities still available for managers willing to take a long-term view, according to GE Asset Management.

Emerging markets performed exceptionally in 2010 as managers looked to avoid companies that dealt with developed market demand, but as the global recovery continues and fears of a double-dip subside, opportunities have come back into developed markets, according to GEAM’s public equities president and chief investment officer Ralph Layman.

The situation in Egypt, concerns over policy tightening in China and the Indian budget have all put a temporary cap on emerging markets, he said.

But emerging markets have greater growth potential, which is being translated into equities more than ever now as governance improves in those companies and emerging markets become more of a consumer in their own right and less dependent on developed market demand for their growth, he said.

As an asset manager it was important to look for newer companies that were geared to local demand in those markets, he said. If you only looked at the big global leaders you’d miss those smaller entrepreneurial names — local growth in non-resource areas would produce sound opportunities, he added.

With emerging markets having gone off the boil somewhat, GEAM would be looking for tactical times this year to increase its weight in that area, Layman said.

Essentially it didn’t even matter that much where an investment was located, you just had to look at whether China and India are buying or selling that product, he said.

“If India and China are selling it you could have a headwind, if they’re buying it you could have a tailwind,” he said. Regardless of where a company is listed emerging markets have tremendous relevance as either an opportunity or a risk, he said.