INVESTOR CONFIDENCE IN EMERGING MARKETS HAS RETURNED FOR THREE MAIN REASONS

Investor confidence in emerging markets is at its highest level for more than a year, according to one of the world’s largest independent financial advisory organisations.

“There’s been a considerable jump in interest from our clients regarding investment opportunities in emerging markets over the last two months,” comments Nigel Green, the founder and chief executive of deVere Group, which has more than 80,000 clients worldwide and $10bn under advice.

He adds: “Our independent financial advisers in every global region in which we operate report that a growing number of clients are now actively expressing a keen focus on emerging markets.

“Emerging markets have taken a hit in recent times, with some significant losses even as recently as earlier this year, but investor confidence is clearly back.  Indeed, judging by the increasing amount of interest shown by our clients in this area, it has returned to where it was around Q1 of 2013, when many investors focused on emerging markets.”

deVere Group’s international investment strategist, Tom Elliott, says there are three main reasons for this shift.

He explains: “Investors have put concerns over current account deficits and the tapering of quantitative easing (QE) to one side, and are now looking afresh at emerging stock markets.  This is driven by three factors.

“First, as developed markets approach old highs, or surpass them, the valuation discount of emerging stock markets has become more compelling.

“Secondly, the tapering of QE has not resulted in higher US Treasury yields and more expensive borrowing costs for emerging market countries.  The persistent low yields on US Treasuries is something of a mystery, but it is nevertheless a ‘fact on the ground’ that supports risk assets.

“Thirdly, political uncertainty has eased a little.  Russia has not invaded Ukraine; India has voted overwhelmingly for a new prime minister, Mr Modi, who is unambiguously dedicated to the cause of economic reform; whilst China has shown itself willing to step in to prevent the collapse of large savings trust companies, and a wave of bad debt coming from Chinese property-related companies and banks has not, so far, materialised.”