Despite the changes that have taken place in recent years, investing in emerging countries can still be a fruitful choice. This is what emerged during the event organized by the investment company Franklin Templeton in Milan, in the spaces of the Samsung Arena.
According to data from the International Monetary Fund relating to gross domestic product, emerging markets now account for more than 50% of the global economy. In the last 10 years, despite a succession of ups and downs, they have shown noteworthy performances, recording faster growth than those recorded in the more developed countries. And according to IMF projections the GDP growth for 2019 and 2020 will still be more than double that of advanced economies.
While one of the strongest concerns for investors remains the outcome of the trade war between the US and China, where both governments have introduced tariffs on imported goods, Franklin Templeton believes there are positive factors within emerging markets that are worth investing in.
For Subashi Pillai, managing director of Franklin Templeton Investment Management, “there are strong reasons to invest in emerging market income, which will be the main driver of global growth in the next century. Investors could consider increasing their capital allocation to bonds from countries such as India, Indonesia, Mexico or Brazil, where sovereign debt yields hover in the 6% to 7% range.”
The changes that have affected the economy in recent decades and then generated a driving force towards the search for new markets, with the direct consequence of seeing the emergence of new commercial realities, have been triggered by a series of variables: demographic factors, increase in consumption, technological progress. Pillai continues: “The transition from the old to the new economy in emerging markets is well established, as is the transition from domestic to foreign revenues. However, many investors remain stuck in the past when it comes to their views on emerging markets, failing to recognize the new opportunities presented today. We believe it is important not just to think about the opportunities of the moment, but also to position ourselves for the future. Emerging markets are a story of change."
“What has happened in recent years and marked a turnaround in the management of emerging markets is that companies have started to be more focused on consumers, rather than solely on their bottom line,” he said during the event. Milanese Anand Radhakrishnan, CIO Franklin Equity India.
According to Vivek Ahuja, portfolio manager at Templeton Global Macro, “i emerging markets have learned from the mistakes made over the past two decades: that is where the change took place. They used to depend on developed markets to develop themselves, but that's not the case anymore. They were able to finance their own deficits and that was a fundamental change."
