Diverse strategies canvassed on emerging markets
Australia needs to move away from investing in whole emerging market countries and focus instead on growing urban centres within particular Asian economies that house large populations and concentrate on technology, infrastructure and industry.
That is the assessment of geo-strategist Dr Parag Khanna, and it has emerged as one of two complementary yet competing theories on the future of emerging markets investment at the Perennial Investment annual conference in Melbourne.
Speaking to Money Management, Dr Khanna said Australia shouldn't be looking just at BRICs (Brazil, Russia, India and China).
"You should really be focusing on what investments are going on, and what industry clusters are being invested in very specific cities," he said.
"Cities make markets and don't just respond to federal initiatives," Khanna said.
Asian investment expert Mark Jolley said Australian investors could no longer gain reasonable exposure to emerging markets, including China, by investing in domestic resource companies. China is becoming self-sufficient in coal and scaling back its iron ore production, he said.
However, Jolley suggested investors needed to invest in Chinese companies themselves, or invest in multinational companies that are directly engaged in China and other emerging markets.
Jolley warned that it may be difficult for investors to build decent exposure, as multinational companies engaged in China were expensive to buy. They were already priced for the "China story", he said.
"Every single global fund manager has said they have three Chinese stocks, but a lot of other stocks. The money [in multinationals] is already in there," Jolley said.
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