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Emerging markets present good opportunity for 2015

15 January 2015

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Emerging markets expert Ashmore has urged investors to keep sight of the big picture despite global volatility in the year ahead.

Jan Dehn, head of research at Ashmore, said although many investors are likely to remain cautious towards emerging markets (EMs) in 2015, they actually offer some significant benefits.

"They offer good value, they won't be overbought, and valuations are pretty attractive, which means you are getting paid for the risk," he said.

Dehn said that EMs have generally responded positively to fickle investor sentiment and will continue to do so.

"Since May 2013 what we have seen is that without exception every time the focus shifts to any one country, that country has responded with adjustments, or reform, for example falling oil prices have led to fiscal measures in Brazil," he said.

"EM is growing faster, is much less indebted and has stronger external balances than any of the heavily indebted developed economies."

Dehn added that geopolitics, specifically the rise of nationalism, xenophobia and foreign policy activism, will have a negative effect on the global market.

"Both EM and developed economies will defend their perceived national interests vigorously – and what is in the national interest may not be in the interest of investors," he said.

Meanwhile, a new study carried out by index provider MSCI, Old Mutual Asset Management and the Society of Pension Professionals, has found pension funds have more than twice as much money invested in Japan and emerging markets as they declare.

Default funds for defined contribution pensions, like many investment products, give details on where they put their money, based on the main stock market listing of each company in which they invest.

These geographical breakdowns can mask large differences in where these companies actually generate revenues, according to the study.

First published 15.01.2015

Lindsay.sharman@wilmington.co.uk