Growth in Asia and emerg­ing mar­kets

Business First - - NEWS -

Bou­tique fund man­ager Metisq Cap­i­tal says emerg­ing mar­kets are be­com­ing in­creas­ingly in­ter­de­pen­dent; with Asian economies and broader global emerg­ing mar­kets set to be­come more re­liant on each other than on de­vel­oped mar­kets to gen­er­ate sus­tain­able eco­nomic growth.

Key eco­nomic and de­mo­graphic trends have driven growth across emerg­ing mar­kets over the past decade and this has trans­lated into pos­i­tive out­comes for eq­uity in­vestors.

In Aus­tralia meet­ing with clients, Metisq Cap­i­tal Chief In­vest­ment Of­fi­cer Kenny Tjan said he saw sig­nif­i­cant po­ten­tial for emerg­ing mar­kets in­vestors, but it would in­creas­ingly be the in­ter­de­pen­dence be­tween emerg­ing Asian economies and broader global emerg­ing mar­kets that would drive growth of both re­gions.

“The steady rise in glob­al­i­sa­tion is cre­at­ing pos­i­tive cross bor­der re­la­tion­ships across many of the emerg­ing mar­ket economies, re­sult­ing in diver­si­fied in­come streams and re­duced volatil­ity of com­pany re­turns,” Mr. Tjan said.

Mr. Tjan used the ex­am­ple of the ma­te­ri­als and min­ing sec­tor to pro­vide an in­sight into the in­ter­weav­ing of emerg­ing mar­ket economies.

The Asia (ex Ja­pan) re­gion is the world’s largest con­sumer of raw ma­te­ri­als, its de­mand far out­strip­ping Asian based com­mod­ity sup­ply. As a re­sult, Asia ex Ja­pan pro­duc­ers and con­sumers are forced to look to­ward the re­source rich emerg­ing mar­kets to meet the in­creas­ing re­gional de­mand. The re­sult is a pos­i­tive lift for both Asia ex Ja­pan and nonAsia ex Ja­pan emerg­ing mar­ket economies.

Over the past ten years, the MSCI Global Emerg­ing Mar­kets in­dex re­turned 13% per an­num, closely fol­low­ing the MSCI Asia ex Ja­pan in­dex, which re­turned ap­prox­i­mately 12% per an­num.

Tra­di­tion­ally, global emerg­ing mar­kets have been dom­i­nated by Asian economies, which con­trib­ute 60% of the to­tal cap­i­tal­i­sa­tion of the MSCI Global Emerg­ing Mar­ket In­dex. The re­main­ing 40% is made up from Europe, Africa/ Mid­dle East and the Amer­i­cas.

Metisq sees an op­por­tu­nity for in­vestors to take a global view of emerg­ing mar­kets to widen the pool of in­vestible com­pa­nies and tap into a range of ex­cit­ing new in­vest­ment themes.

“While the Asia emerg­ing mar­kets re­gion alone has pro­vided in­vestors with strong re­turns, a global view to emerg­ing mar­kets rep­re­sents a more com­pre­hen­sive in­vest­ment uni­verse to bet­ter meet in­vestor needs,” Mr. Tjan said.

Mr. Tjan over­sees Metisq’s fun­da­men­tal Asian eq­uity re­search, tar­get­ing qual­ity com­pa­nies with at­trac­tive val­u­a­tions and pos­i­tive mo­men­tum char­ac­ter­is­tics for the Metisq Asian Share Fund and Metisq China Share Fund.

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