The stars are well aligned for emerging markets
Veteran global investors are optimistic that the convergence of key factors that traditionally shape market dynamics such as favourable interest rates, a stable US dollar, and advantageous oil prices, bode well for emerging markets.
Emerging markets are poised for growth, buoyed by favourable interest rates, a stable US dollar, and beneficial oil prices, per Mark Matthews of Bank Julius Baer & Co.
Matthews pointed out that Korea and Taiwan currently feature among emerging markets but they should be classified as developed markets. In fact, he believes Korea will be added to the MSCI’s developed market index and taken out of emerging next year. But excluding Korea and Taiwan, he noted, "the really big two we all know are China and India.”
Matthews expressed concerns about the Chinese economy.“The momentum is bad. The October numbers show particularly worrying signs in the property sector, property prices, property sales, and new construction starts were all significantly worse than even poor expectations."
And so, in the absence of a compelling reason to invest in China, he believes there's only India. Nobody's going to buy Russia and while some investors might look at Brazil, it is far away and hard to understand, he noted, adding that the remaining are very small markets like Southeast Asia and the rest of Latin America.
Drawing parallels between China and India, Matthews said that both countries have price-to-earnings (PE) ratios that are in line with long-term averages, suggesting a level of stability in valuations.
Talking further about India, he said, “No change in our view. We like it, the price-earnings ratio is bang in line with the long-term average at about 19 times forward earnings and high teens, possibly even low 20s earnings growth, depending on what the oil price does. So why not be in India and we are.”
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Other global market experts have also been highlighting the attractiveness of India within the emerging markets landscape.
In an exclusive chat with CNBC-TV18 in September, veteran investor Mark Mobius, who manages nearly $300 million across various countries, said that global investors who intend to invest in Emerging Markets, have India as the main option.
Often regarded as the founder of Emerging Market investing, Mobius said that his exposure to India was (as of September 27) at 20%, at least double the 5-10% exposure he historically had.
The next in line was Taiwan, but due to challenges arising from issues with both China and the United States, there were no plans to significantly increase exposure there. Korea was also on their list, along with smaller positions in Thailand and Turkey, the latter being a very minimal allocation.
"Therefore, India remains the primary focus with the most significant weightage in the portfolio," he said.
According to Cameron Brandt, Director of Research at EPFR Global, promising economic prospects, political stability and strong growth potential help a notable bias in favour of emerging Asian markets in the global investment landscape.
Also Read | Mark Mobius to step back from Mobius Capital Partners, plans to work on new projects in Dubai
India's allocation in global portfolios remains stable, consistently ranging from 8% to 10% of the average portfolio. This steady allocation reflects the confidence that international investors have in India's potential and its ability to weather economic challenges, Brandt told CNBC-TV18 in October.
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First Published: Nov 21, 2023 8:56 PM IST
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