Surveys

IFA Favourability Towards Emerging Markets Increases Despite Geopolitical Tensions

Stephen Little Reporter London 2 July 2014

IFA Favourability Towards Emerging Markets Increases Despite Geopolitical Tensions

Over half of intermediaries (51 per cent) currently believe their clients should increase their exposure to emerging market equities, despite slowing growth in China and concern regarding the impact of conflict in the Ukraine, according to the latest Baring Asset Management barometer.

Over half of intermediaries (51 per cent) currently believe their clients should increase their exposure to emerging market equities, despite slowing growth in China and concern regarding the impact of conflict in the Ukraine, according to the latest Baring Asset Management barometer.

The research revealed that more than a quarter (26 per cent) of IFAs are “very favourable” towards emerging equities, up from 14 per cent in the last quarter, while the number of intermediaries “very favourable” towards frontier markets was up 7 percentage points to 17 per cent, with overall favourability at 55 per cent.

“We are encouraged by the strong sentiment towards frontier economies. This is a nascent asset class that Barings is very excited about as we believe these markets offer significant potential for long-term growth in a low-growth global economy. Return on equity and dividend yield forecasts for frontier markets in 2015 are significantly ahead of developed and emerging markets, reflective of higher relative economic growth rates and early stage opportunities,” said Rod Aldridge, head of UK wholesale distribution at Barings.

The survey found that 58 per cent of those questioned believed slowing growth in China to be a major macro-economic challenge to investment growth over the next six months up from 35 per cent.  Additionally, 56 per cent are also concerned about the impact of the Russia/Ukraine conflict, far ahead of other concerns such as eurozone growth problems (27 per cent) and over-leveraged economies’ ability to reduce debt (49 per cent).

“Our research shows that interest in emerging markets as an investment opportunity is recovering.  The short-term outlook for emerging markets remains challenging, as evidenced by the recent events in Thailand.  However, on a long-term basis, we strongly believe that Asian and emerging markets will continue to grow and develop,” said Aldridge.

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