Emerging markets turn setbacks into growth
Even though the emerging markets of Asia and Latin America suffer setbacks their turn around time is more rapid as is the extent of the recovery, according to Dresdner global equities director Mark Phelps.
Even though the emerging markets of Asia and Latin America suffer setbacks their turn around time is more rapid as is the extent of the recovery, according to Dresdner global equities director Mark Phelps.
"That emerging markets are volatile was seen in the Asian crisis but the way in which they come back is much better and there is rapid growth over a reasonable time," Phelps says.
"The valuations are usually low as a result but they do well when the global econ-omy picks up. As such these markets are only applicable for sophisticated and long term investors."
The reason Phelps is confident in these markets are they are usually aware and tol-erant of crises and appropriate responses.
"The whole Y2K issue in emerging markets is not such a big deal where glitches in the system are normal. These people know how to light a candle and usually have one around, unlike many parts of the western world," he says.
Phelps also feels that areas like Latin America which have been struggling to breach the barrier of inefficiency in business and government, and Asia with it's large pool of labour and resources will be the next growth regions.
"Any market with spare capacity such as people, resources and a burgeoning con-sumer culture, will do well. This is evidenced in Japan and the USA which are al-most at full capacity and issues like inflation are of concern there," Phelps says.
"In the emerging markets, especially Asia, many companies bombed and dragged down the countries but these nations with population growth as a driver of con-sumption and a high savings culture providing a good base have the basic shapes needed to move ahead."
However Phelps says caution is needed as well as striking the balance between mature and emerging markets to avoid any negative returns.
"Each region is different in their cycle and emphasis of economic growth but there is good growth in the absence of high interest rates and lower risks so there are good investments as long as they are kept diverse," Phelps says.
AUTHOR
Jason Spits
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