Fund managers believe that emerging market assets are poised to outpace developed market assets, based on shifts in monetary policy and other economic factors.
Outlook for Emerging Markets
As the Federal Reserve's monetary policy eases and many emerging economies implement stricter budget policies, interest in these assets is rising. Fidelity International, T. Rowe Price, and Ninety One Plc argue that lower inflation allows for interest rate cuts that could stimulate growth.
Analytical Forecasts
Forecasts suggest that the MSCI Emerging Markets Index is set to increase by 15% over the next year, compared to only 10% for developed market indices. The flow of investments also supports this view, as equity funds are moving into emerging markets faster than into their developed counterparts. 'EM equities are likely to outperform as they enjoy the tailwinds of easing local monetary policy,' said George Efstathopoulos from Fidelity.
Advantages in Currency and Debt Markets
Currency and debt markets are affecting this trend as well. According to Thomas Poullaouec from T. Rowe Price, while much of the upside in EM currencies is already priced in, there remains positive potential for certain currencies like the Brazilian real. Local currency debt also looks optimistic amid cooling inflation surprises in these economies.
In conclusion, funds and analysts are confident that emerging markets hold significant growth potential, especially amid changing monetary policy.
