Emerging market equities will offer the best returns, says Barings' CIO, Marino Valensise
Emerging market equities will offer the best returns, says Barings’ CIO, Marino Valensise
Emerging market equities offer exciting investment potential as the global economy stages its recovery, according to Marino Valensise, chief investment officer at Baring Asset Management.
Speaking at the recent Barings Autumn Investment Conference, Valensise explained: "While we believe that the rally in equities is set for a pause, and that the wider economy needs to play catch-up, it is emerging market equities that will offer the best returns."
Barings considers emerging equity markets have the ideal mix of attractive valuations, positive revisions to earnings estimates, healthy economic growth, low interest rates and supportive fiscal and monetary policy.
Global emerging equities have outperformed developed markets in recent months and Barings expects this to continue. Any long-term investor should have a significant allocation to countries where GDP per capita is going up fast.
"When comparing developed and emerging markets, China is a key exemplar of a country which has put the resources from fiscal policies to practical use by investing in infrastructure, such as ports and education, which will benefit the region in the long-term," said Valensise. "There is as much liquidity in China presently as there was back in 2003 and because of this, it's very much business as usual in China."
Barings believes the rise of Chinese consumerism will, over the next decade, eclipse the US and drive the world economy. China currently has a 6.4% share of global consumption and Barings expects this to grow to 21.1% by 2020. At that stage, the Chinese consumer will be as important for the world economy as the US consumer. Investors should be looking to tap into this exciting growth opportunity sooner rather than later.
Valensise predicted that the commodities boom will continue to support the outperformance of emerging markets and highlighted gold, copper and agricultural commodities in particular. "Gold has performed extremely well and typically represents a 10% to 15% share in our multi-asset portfolios. Copper is becoming increasingly attractive, given it is the only metal that can be used for the ongoing electrification of the power grids of many emerging countries."