From Latin America to Asia, Emerging Markets Are Favored

  • Survey respondents are most bullish on Latin America, Asia
  • Developing-nation assets are still cheap: BNP Investment

Where to Invest in Uncertain Times

Emerging-market assets are set to outperform their developed peers, weathering political risks from North Korea to the U.S. and Europe.

That’s according to 15 investors and analysts from Asia to Europe and the Americas surveyed by Bloomberg between March 29 and April 18. Stocks will outperform bonds, while on a regional basis Latin America is most favored, followed by Asia, the survey showed. Japan was the least favored area among emerging and developed markets.

Emerging-market assets have won over investors including Goldman Sachs Asset Management and BlackRock Inc. amid improving prospects for growth. Their resilience to U.S. President Donald Trump’s protectionist rhetoric, rising tension on the Korean peninsula and European elections is also adding to their allure.

“Emerging-market assets are likely to outperform due to reasonable valuations, stronger commodity prices, scope for currency appreciation, a patient Fed and solid growth momentum,” said Guillermo Felices, a London-based senior market strategist for multi-asset solutions at BNP Paribas Investment Partners, which managed $600 billion of assets at the end of 2016.

Developing-market equities have handed investors almost 12 percent return this year, more than double that of developed stocks, while a gauge of local-currency emerging-nation bonds is up 7.1 percent, more than twice the gains in the Bloomberg Barclays Global Aggregate Index.

“As global growth continues to expand, the EM currency rebound should continue for the near term,” said David Lafferty, chief market strategist in Boston at Natixis Global Asset Management, which oversaw $877 billion of assets at the end of last year. Bonds in Latin America may outperform as “countries like Mexico and Brazil have relatively attractive yields, while inflation expectations are either falling or remain fairly well anchored,” he said.

Survey respondents were BNP Paribas Investment Partners, Natixis Global Asset Management, FPG Securities Co., NBC Financial Markets Asia Ltd., Standard Life Investments, SBI Securities Co., Deutsche Bank Wealth Management, Mitsubishi UFJ Kokusai Asset Management Co., UBS Wealth Management, DuPont Capital Management Corp., Invesco Ltd., AllianceBernstein LP, Krung Thai Bank Pcl, Daiwa SB Investments Ltd. and TD Securities LLC.

— With assistance by Hannah Dormido, Aline Oyamada, Ben Bartenstein, and Daisuke Sakai

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