An Introduction to Mutual Funds: Emerging Markets Comparison
The mutual fund landscape within emerging markets around the world is a fascinating and diverse environment, offering long-term investors the opportunity to see significant returns. For example, reports from a variety of mutual fund managers indicate that over the past decade, the average mutual fund in global emerging markets has returned 461% (The Telegraph Online, 09/16/2011).
This is argued to be because emerging markets are currently in a much better position than their Western counterparts due to their typically higher fiscal buffers and lower debt levels, as well as strong macroeconomic trends.
Therefore, investing in emerging markets is potentially advantageous through a mutual fund. However, it is important to remember that it is emerging market funds held only as part of a diverse investment portfolio that have seen the safest returns in recent times, primarily for long-term investors.
Here we take an introductory look at the mutual fund landscape within a selection of key emerging markets.
South America:
South American countries have arguably seen the biggest change of all emerging markets, and mutual fund activity has grown recently.
For example, the integration of the stock market between Colombia, Chile and Peru, which made it the second largest stock market in the region, has drastically altered the landscape within the region, especially since Mexico and other countries have also expressed their desire to join.
The region’s major cities are also showing increasing signs of becoming key international business and tourism destinations due to large-scale upgrading of local infrastructure, a trend with the potential to generate economic benefits for foreign investors. For example, Colombia’s real Gross Domestic Product (GDP) grew by around 6.0% year-on-year in 2011, while inflation ended 2011 at less than 4%, facilitating a generally upbeat economic outlook.
Certain areas within the region also display a forward thinking mindset towards energy production and consumption with a focus on efficiency which, combined with significant growth in production volumes, should create a healthy investment environment in the future. future.
Southeast Asia
Southeast Asia has undergone large-scale economic changes over the past decade. Offering the potential for real growth in many developing markets, this dynamic region has become an attractive modern investment arena.
The economies in Southeast Asia have been growing faster than many developed countries, such as North America and Japan, as well as Western European nations. They have also outperformed many of their emerging market peers, reflected in a steady increase in mutual fund activity across the region.
This growth has been largely driven by the fact that Asian economies are rapidly increasing domestic consumption of a wide range of goods. Increased demand for Asian industrial commodities has provided further impetus and rising demand is expected to continue growth in industrial production, providing further impetus for investment fund activity.
For example, the Indonesian stock market was one of the best performing markets in 2011: the MSCI Indonesia Index rose 6% in US dollar terms in 2011, and this is expected to continue through 2012-2013.
This strong performance has been accompanied by the growth of Malaysia as a very attractive investment destination, particularly for consumer goods and commodities stocks. As a result of sound fiscal policy, stable fundamental macroeconomics, and continued demand for natural resources, the long-term outlook for the country appears resilient and positive.
Thailand also appears to be healthy and the economic recovery in good shape. The key to this economic growth has been the maintenance of the country’s significant agricultural resources, the exploitation of offshore gas reserves, as well as the well-established and highly successful manufacturing and tourism industries.
As a whole, Southeast Asia, like South America, will also benefit from the continued increase in the quality of infrastructure within each nation, and this development will feed each country in the region. This should mean that investing in a well managed trust with regional experience will generate strong returns.
Porcelain
China is the world’s most populous country and remains one of the fastest growing major economies.
Consumerism has experienced colossal growth in the modern era as per capita income has risen. This high demand for consumer goods and services ensures that the earnings growth outlook for managed investment is extremely positive. China’s foreign exchange reserves are also the largest in the world, making it less vulnerable to external financial downturns. Combined with the fact that inflationary pressures have continued to ease in China and the industrial sector continues to post strong growth, it means that international investors remain attracted to China’s booming economy and continue to increase their activity.
raw material stocks they are the obvious attraction as global demand for commodities is expected to continue its growth in the long term and as such commodity prices will continue to rise due to ongoing demand and supply constraints associated with the area.
India
A weak rupee means that there is currently a risk of inflation, but this also makes India more competitive in the global arena. Some companies have been negatively affected, while others, such as exporters, benefit from higher foreign income.
If foreign investment in India increases, the strength of the rupee would increase and this seems to have been spurred by a government decision to allow more than 50% ownership by foreign companies in the retail area.
However, the general weakness of global equities and the fact that the Indian market is somewhat more expensive than other emerging markets means that large investment flows into the country could be inhibited in the short to medium term. This adds to the overall volatility of the Indian market and as investors around the world look to move their money into assets they perceive to be safe due to the global financial climate, predicting future mutual fund activity in India is a challenge. challenge.