T. Rowe Price frontier markets equity manager Oliver Bell reminded the audience that the success in many of the emerging markets was based on commodities. “Now the tide has turned, and people have started questioning this narrative.”
Decoupling revisited
Until a few years ago, it was widely believed that emerging markets would sooner rather than later be able to decouple from the developed world and deliver self-sustaining growth. After the disappointing results of emerging equity markets in the past years, it takes guts to still believe in decoupling. Even emerging market equity managers admit emerging markets will never be immune to influences from the US and Europe.
“A complete decoupling is definitely not happening,” said Dennis Lai, manager of the Allianz Asia Small Cap Fund.
US sets the pace
Daniel Isidori, who is in charge of the Threadneedle Latin America Equity Fund, took the same line, arguing even that Western, and specifically American economic hegemony is inviolable. “In the 1980’s Japan was going to take over the US, in the 1990’s Europe was doing that. Now China is the challenger. But these claims are myths, as the US has proven over time that it has the possibility to reconvert itself.”
Isidori’s claim was challenged by a number of other panellists, albeit hesitantly. “There is certainly a change of balance, with market capitalisation in Asia going up very fast”, said François Millet, head of ETF’s for Lyxor.
“An incremental shift is definitely happening. Asian leaders are more assertive now, but it will not replace the important influence of the US,” Dennis Lai added.
EM sentiment booming
So what about the delegates then? The packed house in Helsinki let their voting pads speak, with a clear majority saying the US would remain the dominant investment force for the foreseeable future. This didn’t however translate in optimism as far as US equities are concerned.
The crowd seemed to believe that, while emerging markets have suffered from weakness in the West over the past years, this time they will stand to profit from its recovery. More than two thirds of delegates will increase their exposure to emerging markets equities in the year to come. This is a number higher than for any other asset class.
Click here to see a slideshow of photos taken at Expert Investor Finland.
Platinum members can additionally view a full breakdown of the event voting data here, as well as long-term comparison graphs on the main asset classes here.
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