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Emerging markets undervalued by investors, says Barings

Emerging economy market capitalisations will account for up to a third of global markets by 2018 but remain under-represented by investor portfolios, says Barings.

Total market capitalisation represented by the emerging markets has risen on average by 1 per cent annually since 1999 and currently stands at 13 per cent according to analysis of MSCI statistics carried out by Baring Asset Management. The investment management firm predicts that this percentage will continue to increase and will account for a third of the global market in the next 10 years.

However, according to May figures from the Investment Management Association, UK investors currently only allocate 1.6 per cent of their total portfolio to global emerging market equities. Barings is advising investors that long-term equity allocations to emerging markets should be significantly higher than this.

Barings head of global emerging equities James Syme says: “There is still a strong long-term growth story in emerging market equities – valuations remain attractive and are sitting well below long term averages so now is a good time to invest in these markets. Recent moves to floating exchange rates, the independence of central banks, current account surpluses, declining interest rates and reduced levels of debt have all made emerging markets an increasingly attractive investment proposition for investors prepared to take a medium to longer-term view.”

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