‘Emerging Markets Have Strong Growth Potential’
By Lee Hyo-sik
Staff Reporter
South Korean and other emerging equity markets are expected to perform strongly in the future on solid economic growth, rising internal demand and improved economic fundamentals, a senior Schroder analyst said Tuesday.
Allan Conway, head of global emerging market equities at Schroder Investment management, told reporters that stock markets in emerging economies have outperformed the rest of the world for the past decade, adding that the trend will continue for years to come.
``From 1998 to May 2007, an index measuring emerging stock markets grew 318 percent, while that of entire global equities rose only 65.5 percent. Also, emerging markets as a whole posted growth for four consecutive years from 2003 to 2006 for the first time in history,'' he said.
Conway said despite a rapid expansion in emerging equity markets over the years, it is still a good time to expand investment in emerging stock markets. ``That is why we have recently introduced a series of onshore and offshore funds investing in emerging equities for Korean investors.''
Schroder Investment management in Korea began offering an `` emerging market winners fund'' since March, attracting a total of 730 million from Korean investors. Last week, it also launched a fund investing in Latin American equities.
Conway cited the three reasons why emerging markets will continue to expand in the future _ strong economic growth, rising domestic consumption and improved economic fundamentals.
``Emerging economies have expanded by 3 to 4 percentage points higher than developed economies. We think strong growth supported the stock market performance in emerging economies over the past five years and the trend will continue over the next 10 years,'' he said.
Conway said emerging economies have started to decouple themselves from advanced countries, adding it is no longer true that performance of emerging economies are directly tied to developed economies because they are now relying more on internally generated demand than on exports for growth.
He said China, India and other emerging economies accounted for the two-thirds of global output last year, adding that they are expected to account for more than 70 percent in the near future. ``Unlike Japan, Korea and Taiwan that depend on exports to other countries for growth, China and India have large domestic markets. Also, the two countries are importing large amounts of goods from other developing countries, pushing up the trade volume within emerging economies.''
Conway also said the economic fundamentals in emerging economies have improved significantly over the years, but said no valuation of emerging equity markets has taken place despite improved fundamentals.
``Now, emerging economies have large foreign currency reserves, low external debts and improved trade balances. These days, it is riskier to put money into the U.S., Japan and Germany than into emerging markets. However, emerging equities are still undervalued and discounted so we think it is still attractive to expand investment into emerging equities,'' he said.
Schroder Investment management, founded in 1804 in London, offers a range of innovative and advanced asset management services to retail investors in 28 countries, with over $260 billion in assets under management.