Emerging economy to lead world out of recession, says S&P
Posted: Wed July 8, 2009 4:17 pm
UAE. The view of most fund managers is that emerging economies are in better shape than developed markets and will lead the world out of the current recession, according to Standard & Poor's Fund Services in its annual review of the global emerging markets, Latin America and EMEA sectors, available at www.funds.standardandpoors.com.
S&P Fund Services lead analyst Roberto Demartini says that a year ago fund managers believed that fundamentals for emerging countries were stronger than ever before and there was a lot of talk about the decoupling theory, which sees emerging countries performing independently of the developed world. A year on, many managers hint at decoupling but very few are willing to name it.
It could be said that the exceptional market circumstances of 2008 proved the decoupling theory wrong.
However, the fund managers told S&P Fund Services that while the essence of the decoupling theory lies in diverging fundamentals between the developed and emerging worlds, the correlation between macroeconomic trends and stockmarket behaviour is not perfect over the short run. They see this as supporting the decoupling theory.
“Looking forward, the managers’ view is that the market will be led more by fundamentals and earnings as opposed to flows or sector rotation,” said Demartini.
“In particular, stockpickers with a Garp approach feel this is their time to outperform, as they believe that after a low-quality rally, which many managers compare to the market conditions of 2003, the focus will shift towards quality growth names trading at attractive valuations,” he continued.
More immediately, the fund managers say there will be a correction in global emerging markets some time in 2009, as the valuations of many stocks already exceed the target prices set by the sell side.
As a result of its annual review, S&P Fund Services made four upgrades to its ratings. Among these was an upgrade to AAA for Gartmore Sicav Latin America Fund in recognition of manager Chris Palmer’s experience and highly successful approach to running Latin American mandates.http://www.bi-me.com/main.php?id=38775&t=1&c=35&cg=4&mset=1011