By Park Hyong-ki
Staff Reporter
Although some believe emerging economies have not yet decoupled from developed markets, an analyst at a global asset management company believes emerging markets are growing less dependent on advanced countries.
Allan Conway, the head of global emerging market equities team at Schroders Investment Management, said emerging markets have ``significantly decoupled'' from the United States and Europe as domestic demand has been emerging as the economies' key growth driver rather than exports to developed countries.
``Emerging markets are a safe haven with strong underlying fundamentals, where investors can gain attractive returns in the long-term,'' said Conway at a seminar in Seoul Tuesday.
He has put ``overweight'' on Korea as the country still remains attractive for investment despite a U.S. slowdown. ``Although its growth has not been as strong as China, it is at a respectable level. Also, Korea has the fiscal power to provide stimulus.''
He added that credit problems stemming from subprime mortgage defaults only lie in developed markets, whereas emerging markets will continue to grow 3 to 5 percent faster than developed economies over the next 10 years or so.
With low-level debts, high saving rates and abundant foreign reserves, emerging markets are bailing out investment banks in the United States, indicating that emerging markets are outperforming developed economies.
The equity strategist said trade between emerging markets has overtaken exports to developed countries as one of the key drivers of their growth. Statistics show exports to the United States have decreased over the last seven years, accounting for 16 percent of their trade, down from 25 percent.
The situation has changed where emerging economies no longer catch a cold when the United States sneezes. ``Now, when the U.S. sneezes, emerging markets say `bless you!''' Conway pointed out.
He expects emerging markets' GDP will account for about 80 percent of the world economy, up from 65 percent last year.
Although subprime turmoil in the United States will slow down equity growth in emerging markets and increase volatility ahead, Conway remains positive that it will only be a ``slight slowdown'' for them.
``We can expect some further outflow of capital, but it will be limited,'' said Conway, projecting that emerging stock markets will begin to rally in the second half of this year as credit woes abate going forward.
He recommended investing in commodity stocks of emerging markets through funds as most commodities and demand are in the region.
phk@koreatimes.co.kr