FE Trustnet quotes Toby Ricketts, the manager of the £87m Margetts Venture Strategy portfolio from Margetts Fund Management, as saying the scale of the emerging market rally in recent months has gone too far.
“What we have seen recently is that the market is becoming driven by sentiment and short-term trends… The sell-off in May last year was too aggressive and there were massive outflows out of emerging market and Asian funds. Investors were then taking that money and it looks like they just chucked it into US equities. They then saw that emerging markets looked good value and have started to go back in. The obvious rise is now over, I think, as the market was oversold and has now bounced back.”
“We may start trimming our exposure following this bounce. We still think [emerging markets] will outperform over three and five years because of dynamics like growth rates and their growing middle classes. However, over the next 6 to 12 months, it’s very hard to call… The point is, it was an easy decision to buy emerging markets in February and it isn’t now. The bargain has gone and though I still think they are good value, the overselling has reversed.”
Ricketts believes that better earnings growth needs to occur to justify further rises and he added that weakness of sterling has amplified the returns UK investors have received from emerging market funds.
To read the whole article, Emerging markets are rallying: So is it time to invest or sell?, go to the website of FE Trustnet.
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