ARE GROWING UP
are in a period of relative underperformance, there i s still reason to believe that i nve s t o r s c a n f i n d s o me g o o d opportunities. Over the long term, the emerging-market story is a positive one.
“A f ascinating t heme t hat has developed over the last 10 or 15 years in emerging markets is how the political economy has evolved in some places,” says Michael Hugman, a strategist with Investec Asset Management’s global emerging-markets team. “What we’ve seen in some of the election campaigns we’ve had this year, such as in India and Brazil, is that the topics that are being discussed are inflation, the stability of currencies, growth and jobs, which are the same discussions that we have in Europe and the US at election time.”
Hugman believes that the changes to this more mature understanding and di s course among t he wider population happens slowly, and so it can go unnoticed, but it is an important indicator of how emerging markets are changing.
“I f you t hink back to t he f i r s t Brazilian election in this democratic period, you didn’t have these levels of sensible discussion on economic policy,” he says. “I ’m not saying that it makes structural reform easy, but having these things as the core of the debate i n emerging markets i s a big change and it creates a huge opportunity.”
While we are in a period of great economic uncertainty, Hugman argues that one thing we can be reasonably ce r t a i n a bout i s t h a t e merging markets will continue to grow as a share of global GDP and global market capitalisation. By 2030, emerging markets will make up almost half of the world’s listed-equity market cap.
“There are strong reasons for this,” Hugman says. “Emerging markets are saving a lot more and gross fixed i nvestment i s also growing much faster i n emerging markets than i n developed markets. This is a recipe for high-productivity growth that will see emerging markets continue to grow their share of global GDP.”