“On a short-term basis, emerging market equities do have a higher degree of volatility, but if we think about longer-term systemic risks, emerging markets appear to us to have more favourable characteristics,” he says.
“Lower government debt burdens and healthier consumers suggest that emerging markets will continue to attract capital.”
Laine concludes that the “uptrend for emerging markets is clear and, in my opinion, should continue”.
“Looking at M&A and IPO activity for the last few years, investors (and investment banks) are positioning for this growth to continue. Investors should be considering whether their current allocation to emerging markets is suitable, given the risk/return trade-offs.”
Fidelity’s Lodha says the make-up of a global equities portfolio should ultimately be driven by where an investor finds the best opportunities – within appropriate risk and return boundaries.
But he adds that “where a stock is listed is less important to me than where the company actually generates its revenues”.
He says BHP Billiton is listed in the UK, but its revenues are primarily driven by Chinese demand for its commodities. Tata Consulting Services is listed in India but its revenue stream is driven by demand for IT services in the US.
