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How to predict emerging markets?

Enables IFA’s in Bishops Stortford like to be able to help people invest wisely.  Trying to predict the future is nigh on impossible but following emerging markets is one of the things most people associate with stocks and shares. Indeed they are part of the history of finance- predicting who the emerging market performers will be. One experienced investor Dr Mark Mobius has recently reflected on what he thinks the future will bring. Mobius runs the Templeton Emerging Markets Investment Trust and the Templeton Global Emerging Markets fund.

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Mobius suggests that ‘emerging markets are in a sweet spot’ at the moment, as they enter the ‘recovery phase’ following the underperformance of 2013. Mobius notes that investors ‘have realised that there are other sources of liquidity in the world’ than the US Federal Reserve, with Japan in particular just at the start of its own asset purchasing programme.  He continued that investors in the US and the Eurozone have begun to increase their exposure to emerging market assets this year saying developed markets have only outperformed emerging markets  two of the past ten years.

Of the more established emerging markets, he feels that Brazil, which has been lagging for some time, could be transformed by the 2014 World Cup and the 2016 Olympics. But when pressed, he felt that the significant economic growth will come from countries that are, at present, much less remarked upon, or which are at present frontier markets – i.e. at a much earlier stage of economic development than the present, more established emerging markets.

The countries that he specifically cited as being likely to drive ‘the next generation of emerging market growth’ are Vietnam, Nigeria and Saudi Arabia.  Mobius cited these countries as having ‘good growth rates’ at present. He acknowledged that positive GDP growth does not always translate into good performance for individual equities in those countries, ‘but a good company has a better chance in a high-growth country than in a low-growth country.’ In addition to growth, these countries also have ‘lower levels of debt, higher foreign currency reserves and booming consumer growth’, which offer investors a reduced level of risk relative to other emerging markets.

Issued by: Enable Independent Financial Life Planners
25c North Street, Bishops Stortford, Herts CM23 2LD
Telephone: 01279 755950 – Fax: 01279 657339
Enable Independent Financial Life Planners is a trading style of Enable Independent Limited is authorised and regulated by the Financial Conduct Authority.
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