Emerging Markets in the East Converging With Developed Markets in the West (Create Research)
According to projections contained in the latest Create Research survey commissioned by Principal Global Investors, ongoing changes in emerging markets mean they are starting to differentiate more in terms of relative performance and increasingly converge with developed markets. The research report, Not All Emerging Markets Are Created Equal, was authored by Amin Rajan, the CEO of Create Research, and based on a survey of more than 700 pension plans, sovereign wealth funds, pension consultants, asset managers and fund distributors across 30 countries, as well as 110 interviews, representing combined AUM of almost $30trn.
Key findings included:
- 56% of survey respondents expect convergence between East and West to broaden in terms of market structure.
- 32% of survey respondents expect convergence between East and West to broaden in terms of investor approaches.
- Investors are becoming more cautious toward the emerging market story, with those who believe in emerging markets dropping from 38% to 20% since 2012.
- Investors viewing emerging market assets as an opportunistic play has increased from 30% to 48% for equities, and 15% to 51% for bonds, since 2012.
- Country-specific risks gain importance over macro risks, which may indicate a return to the age of the stock-picker 47% of investors believe the US recovery will deliver the best returns over the next three years.
- Nearly 65% of investors believe the US government will make significant progress in rebooting its economy over the next three years.
- 30% of investors think the outlook for Europe remains decidedly cloudy, with only isolated pockets of revival expected.
In addition, the report found that 35% of survey respondents believe China will deliver strong returns over the next three years, but just 15% believe Brazil can do so plus over half felt China will be able to make significant progress in implementing economic reforms, but just 6% subscribe to that view when it comes to Russia.
Meanwhile, 45% of respondents selected frontier markets in Africa as one of the regions likely to offer the best returns in the next three years, while more than a third selected China and just 8% said Russia. Brazil was also favored by 15% of investors in the survey and India by 14%.
Finally, Rajan predicts that acronyms to describe emerging market groupings, such as Brics (Brazil, Russia, India, China and South Africa) and Mint (Mexico, Indonesia, Nigeria and Turkey), will become less common as investors adopt a more nuanced view of emerging markets, which recognizes the differences between them as much as their commonalities.
To read a good summary of the report, see the article, Increasing convergence of East and West a boon to stockpickers – Create Research survey, on the website of Investment Europe; or the article, Emerging markets “not created equal,” on the website of Funds Europe.
- Key Findings: Credit Suisse Emerging Markets Consumer Survey
- Mark Mobius’s Emerging Markets Outlook (WSJ)
- Changing Investor Attitudes About Emerging Markets (CNBC)
- Artemis’ Edelsten: Emerging Markets are Expensive With the Exception of China (What Investment)
- China Still Leads the BRICs in the Global Competitiveness Report
- Nielsen Global Survey of Consumer Confidence for Q1 2015
- Emerging Market Investors Need to Think Beyond Investing in the BRICs (II)
- S&W’s McGrath: Emerging Markets Are at the Perfect Entry Point (FE Trustnet)
- Best Consumer Stocks for Emerging Market Investors (Morningstar)
- Margetts’ Ricketts: Low Oil Prices Mean Asia and Emerging Market Funds Can Keep Rallying (FE Trustnet)