Emerging markets’ long-term growth premium remains fairly robust and on an upward trend relative to developed markets, according to Samuel Bentley, client portfolio manager, Eastspring Investments, the $247bn asset management business of Prudential plc.
“Looking ahead, we believe we are in the initial stages of a substantial structural change in the global economy. At the same time, emerging markets are benefiting from a convergence of positive factors. This can lead us into the next bull cycle for emerging markets equities,” he said.
Bentley pointed out that the growth in earnings per share in emerging markets is rising faster than in developed markets for the first time in a decade.
Perhaps most significantly, emerging market equities are under owned by fund managers and attractively valued on both absolute and relative basis compared with developed Markets.
China is clearly prominent for investors as they digest recent official stimulus initiatives and the prospect of further moves.
Indeed, the recent US-led rate cut cycle opened a window of opportunity for China to launch pro-growth policies.
Meanwhile, “the latest support package for the property and stock markets marks the first major coordinated easing in years”.
Although a real improvement in fundamentals will be needed to sustain a medium-term uptrend, “we believe Chinese equities remain a highly investable opportunity and we are selectively picking up some incredibly good companies at very attractive valuations,” said Bentley.
