Emerging markets tipped to hold strong

One of Australia’s biggest fund research houses has encouraged local investors to retain their exposure to emerging market equities, with explosive growth tipped to continue.

Speaking at the van Eyk annual conference, managing director Stephen van Eyk said emerging markets, which include Brazil, Russia, China, India and the smaller Asian economies, had experienced a stellar run in the past 12 months due to excess world liquidity, strong world growth and a perception by investors that the global economy had stabilised.

“No one expects any big shocks for the foreseeable future, so capital is pouring into equity and debt markets that would have been considered too risky three years ago,” he said.

van Eyk said perceived strong productivity growth was also giving investors confidence that emerging countries could pay back foreign market debt.

But he also admitted that current price earnings ratios in emerging markets were high relative to major markets.

“However the vastly superior long-term growth prospects of these markets leaves us in little doubt that most clients should have an exposure to emerging markets in their international equities portfolio.”

Such impressive growth could continue over the next decade, according to van Eyk, as big multinationals set up shop in emerging companies.