Fund houses anticipate emerging market recovery

Emerging markets signExpectations appear to be mounting for a recovery in emerging markets, as commodity prices potentially near their bottom and China’s program to transition its economy continues.

With factors likes these in mind, and though mindful of continuing risks, some asset managers are looking increasingly favourably at the area.

Here are a range of broadly positive views from the industry in the past week.

Geraldine Sundstrom, head of asset allocation, Emea, Pimco: The landscape in emerging markets (EM) has been steadily improving over the last few months. Commodity prices are tentatively hitting a bottom, China’s economic transition is proceeding well and the Federal Reserve has tempered its plan to raise interest rates, and with that, the strength of the US dollar.

With this in mind, we are beginning to redeploy capital to EM where we can find good value.

Royal London Asset Management: Emerging markets could underperform if dollar strength leads to a pull-back in commodity prices. However, with the prospects of a synchronised upswing in global growth improving, we have trimmed underweights in these areas, funded out of the US.

Jane Davies, manager of the HSBC Global Strategy funds: We think EM equities look attractive for investments originating in major Western currencies (USD, GBP or EUR), given our expectations of longer-term currency appreciation. However, there could be some near-term volatility amid concerns around future Fed tightening, the rate of economic adjustment in China and the global economic growth picture.

Viktor Nossek, director of research at WisdomTree Europe: Now, amidst signs that decelerating growth in China may be bottoming, commodity prices stabilising, and evidence of some corporate balance sheet restructuring, deep value opportunities for EM equities have opened up. Income investors seeking yield may find EM equities a more compelling yield proposition in this environment…

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