Still Years Of Growth Expected From Emerging Markets

Investors wary of putting money into emerging markets have been reassured after a leading merchant bank said that many of the countries still have a decade of growth to come.

The prediction comes from JP Morgan, which says that emerging markets will enjoy 15 years of intensive commodity growth which will be led by China investing in its infrastructure.

Neil Gregson, a fund manager at the bank, said: “Since 2000, emerging market countries have been unlocking their growth potential and facilitating the catch-up process. This will last until 2030 and will be commodity intensive throughout.”

Despite China’s recent growth slowdown, he says that the country will begin investing again boosting demand for iron ore, cement and coal as it switches from exporting to building domestic consumption.

The demand for other commodities, such as oil, will also increase to match the growth in car ownership.

Indian Urbanisation

Mr Gregson also highlights India as having several years of intensive growth, because the country needs to double the amount of the urbanisation to accommodate the 600 million people set to be city dwellers in the next 20 years.

To achieve this, he says that India will need to build homes at 20 times the rate of recent years.

The country will construct up to 900 million square metres of homes and commercial property, along with nearly 400km of subway, every year.

As a result, the price of copper will remain high for years to come since the metal is used extensively in wiring new buildings.

Mr Gregson also says that commodity prices will increase further should there be a sharp rise in growth in Japan, Europe and North America which will bring supplies under pressure.

Meanwhile, investment fund manager fears about the imminent disintegration of the Eurozone have diminished, but uncertainty still lingers about the short term future of the single currency.

Eurozone yields

Despite the fears, European investment company shares have been performing well with the average increase in price for investment companies being around 12%.

Even European smaller investment companies have been performing well, up by 27%.

One of those who attended the conference, Tim Stevenson, of Henderson EuroTrust, said there is a gulf appearing between how European companies are performing and how the Eurozone is working at an economic and political level.

However, many investment managers admit that while the European equity market is not as cheap as a year ago, the rising market is offering opportunities for profits though dividend yield from European firms is falling.

They point out that as the market continues strongly then dividends will inevitably increase.