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Emerging market equities most attractive asset class, say institutional investors

Thursday 28th August 2014

Institutional investors regard emerging market equities as the most attractive in terms of risk and return over the next six to twelve months, a new report has suggested.
The research, carried out by ING Investment Management (ING IM), found that 37%
of respondents selected this asset class, followed by global equities (33%), US equities (33%) and European equities (32%). The sixth most ‘attractive’ asset class was seen as EM Corporate Debt (27%).
When asked about the recent underperformance of emerging market assets and how they rate the sector’s chances of recovery over the next three to six months, 16.7% of institutional investors who were interviewed said it was ‘highly likely’, 42.3% said it was ‘reasonably likely’ and 15.4% said it was ‘unlikely’.
Maarten-Jan Bakkum, Senior Emerging Markets Strategist at ING IM said: “The global emerging market growth picture remains mixed. On the one hand, there is some improvement in China but on the other hand, there is continuous weakness or even deterioration in a group of other important emerging economies such as South Africa, Turkey and Brazil.” 
“The Chinese growth pick-up remains thin on data, but is being embraced by investors. The manufacturing PMI has improved while the services PMI fell to the lowest level since its existence. Railway freight volumes continue to shrink, but highway freight volume growth has accelerated.”
“Overall, we see improving technical factors, while EM fundamentals remain poor. With investor expectations more realistic than earlier in the year, we feel that a small overweight position is justified now,” he added.

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