Time To Reconsider Emerging Market Hopes

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It’s time to ditch those doubts over emerging markets as the brakes go on economic growth around the world, says an investment expert.

Although 2018 saw a correction in emerging markets, there’s no reason to be nervous about the future, according to Saker Nusseibeh, chief executive officer of fund house Hermes.

He explains that emerging markets are the natural place to look for investment growth because the traditional leading lights are all slowing up.

The US economy is inevitably decelerating as interest rates rise and poor decisions by President Donald Trump’s administration over the federal shutdown and funding The Wall self-inflict harm.

Political uncertainty

Europe is in the grip of a slowdown as well and is yet to see the consequences of Brexit – especially if leaving the European Union is delayed or comes to a no deal.

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That leaves the economic giant of China, where double-digit growth has dropped to a 6% year-on-year GDP increase.

“It seems to me that Western investors have lost sight of the fact China is a Communist country and economic growth is being directed centrally for a political purpose, not simply to grow the middle class – and that appears to remain on track,” said Nusseibeh.

“Globally, political uncertainty is on the rise, partly due to a more assertive Russia – which took President Trump’s policy of withdrawing from a position of global influence as a green light for its own expansion. Recent activities in Syria are a prime example of this.

Look east for best growth

“China, too, in response to the withdrawal of American influence, has become a lot more vocal about Taiwan and south-east Asia generally. Elsewhere, Brexit has politically taken up most of the 27 EU nations’ time for the past two years, without even looking at what it has displaced in the UK parliament.

“Given this level of uncertainty, I am more confident in the possibility of finding long-term value in markets that are still emerging than in the signs that I see in more established ones. In the short term, at least, I think there is more upside in eastern emerging markets than in their developed neighbours to the west – but we are always aware that one correction does not preclude another.”

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