News Column

Emerging markets: It's not a case of mass exodus

July 12, 2014

Babu Das Augustine Banking Editor

Dubai: Investors have not lost faith in the emerging market story; they are simply questioning it, according to a recent research report titled €˜Not all emerging markets are created equal' by CREATE-Research.

The study based on the findings of a survey of more than 700 pension plans, sovereign wealth funds, pension consultants, asset managers and fund distributors across 30 countries with a combined asset under management of $29.7 trillion (Dh109.06 trillion) showed the percentage of €˜believers' [in emerging markets] has declined from 38 per cent to 20 per cent and €˜pragmatists' from 23 per cent to 21 per cent.

With the increased volatility in these markets the percentage of €˜sceptics' has risen from 18 per cent to 28 per cent, that of €˜cynics' from 15 per cent to 19 per cent and that of €˜deserters' from 6 per cent to 12 per cent. This tilt is duly reflected in their overall asset allocation.

On the buy-and-hold side, the percentage favouring equities has risen from 43 per cent to 49 per cent ; since they currently trade at 1.4 times their book value compared to 1.9 times for developed market equities. At the same time, those favouring bonds have fallen from 44 per cent to 34 per cent. On the opportunistic side, the sentiment shift has been most pronounced. Those investors viewing emerging market assets as an opportunistic play has shot up: from 30 per cent to 48 per cent for equities; and from 15 per cent to 51 per cent for bonds.

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Source: Gulf News (United Arab Emirates)

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