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Emerging markets to show strong growth

(China Daily/Agencies)
Updated: 2009-10-15 07:55

Emerging-market stocks have room for further gains in the next one to two years because of earnings and economic growth prospects, said Allan Conway, head of emerging-market equities at Schroder Investment Management.

"There's significant return for emerging markets" after driving world growth and with corporate earnings set to strengthen, Conway told reporters in Seoul. Emerging nations will represent 70 to 75 percent of global growth for the "foreseeable future", he said.

Among global emerging markets, Conway said he was "overweight" on China, Russia, Indonesia, South Korea, Hungary and Turkey. Global emerging markets that are approaching fair value versus developed have a "much stronger earnings growth outlook", according to Conway.

The MSCI Emerging Markets Index, a benchmark for 22 developing nations, has advanced 68 percent this year as rising commodity prices boosted earnings prospects for raw materials producers and signs of a global recovery lured investors into high-yielding assets. That compares with a 25-percent gain in the MSCI World Index.

All of the world's 10 best-performing benchmark indexes this year are emerging markets, including Russia, Peru, Ukraine, Sri Lanka and Argentina that have more than doubled, according to data compiled by Bloomberg.

Investor Mark Mobius said last week he expects emerging markets to surpass previous records, predicting a continued rally with "corrections along the way". JPMorgan Chase & Co's Jan Loeys said last week investors should buy emerging-market equities and sell advanced-nation shares as developing economies recover faster from the global recession.

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Irrespective of the nature of the current global economic recovery, "emerging market growth looks much better than developed economies", Conway said. Domestic demand is growing and trade among developing nations is growing, making them less reliant on developed countries, he added.

The so-called BRIC countries of Brazil, Russia, India and China, are at an "early stage" of development that will accelerate, according to Conway. The region, with an estimated 2.9 billion population with rising disposable income, is creating demand, he said.

"The importance of BRIC will just get bigger and bigger" and it's not a short-term trading story, Conway said.