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Emerging markets will bounce back, says F&C

Stock markets across the emerging economies have not escaped the recent global equity market turmoil but the outlook for economic growth remains strong, according to F&C.

Manager of the F&C global emerging markets portfolio and deputy manager of the F&C emerging markets Oeic Sam Mahtani says emerging markets have fallen by 15 per cent since the peak in July, but he believes they are likely to rally back quickly once confidence returns.

He says: “We are focusing on those economies where there is strong domestic demand and where there are internal dynamics for growth, including Korea, Brazil, India, Thailand and Egypt. Although each of these countries is at a different point in the economic cycle, they all share a common trait, namely their growing independence from the US economy as domestic demand continues to increase. This trend looks likely to continue to drive emerging market growth in the future.”

As examples, he points to spending by the Indian Government, which has committed some $300bn to infrastructure projects over the next five years and the Egyptian economy’s increasing support from the rising price of oil, high levels of tourism, privatisation and increased government spending.

He adds: “In Egypt as elsewhere in the developing market economies, the key factor driving growth is domestic demand. Although we think there could be another 5-10 per cent downside to emerging markets in the short term if risk aversion levels increase again, their growing maturity means a slowdown elsewhere in the world will have a limited impact on the real economic fundamentals of emerging markets. Strong domestic demand is a secular story and one which is here to stay.”

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