US fund managers set to rediscover EM stocks

Emerging markets sign1High valuations in the developed world are predicted to push US fund managers to invest heavily in emerging market equities, causing a “reawakening” of the asset class.

“Emerging market equities have taken a multi-year breather,” says Leo Grohowski, chief investment officer at BNY Mellon Wealth Management, who spoke at a briefing for journalists in Dubai. “There’s likely to be a reawakening.”

Grohowski added that “value” managers, who buy stocks that appear undervalued according to fundamental analysis, will lead the charge into emerging market equities.

“Tactically, what’s popping up on screens of value managers are emerging market stocks,” he says. “You’ll find more stocks trading a low values here than in the developed world.”

Although Grohowski held back from saying the US stock market was overpriced, he suggested the rapid rise in indices such as the S&P 500 meant the US market was “fully valued” and equity investors should look elsewhere for growth.

He added that many ominous signs in emerging markets, such as the potential for a financial crisis in China, had already been “priced in” by equity investors, meaning emerging market stocks were relatively inexpensive.

©2015 funds global mena

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