The emerging consumer and the new normal

If only I had invested in an emerging markets fund instead! (Fiona Rintoul wishes she had looked elsewhere for her pension)



Many turning points have been passed in recent months – China overtaking Germany, China overtaking Japan – and now there is a new one, shared with us by Curtis Mewbourne of Pimco in his emerging markets watch. In the first quarter of this year, for the first time ever, General Motors sold more vehicles in China than in the US. And, according to Mewbourne, this isn’t just a China story.

“Roughly 50% of GM’s sales this year are outside of the traditional American and European markets,” he writes. “So for one major global manufacturer, the EM consumer is indeed ascendant.”

This fits with Pimco’s evolving view of a ‘new normal’ world where real GDP growth of 1-2% is expected for the developed world, compared with 4-8% for the emerging markets. The investment opportunities in the emerging markets will be among the most attractive globally, PIMCO believes, though they will of course not be without risks.

“For EM investors those risks would include political risks, policy risks and, in some cases, liquidity risks,” writes Mewbourne. “But we think the balance of potential risks and returns looks compelling.”

Fiona Rintoul, editorial director
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