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IFAs favour emerging market equities, says Barings

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Over half of intermediaries (55 per cent) currently believe their clients should increase their exposure to emerging market equities, according to the latest Baring Asset Management Investment Barometer.

This is a significant rise from 41 per cent in the last Barometer, and the highest sentiment towards the emerging markets asset class for the past year.
 
Barings’ research, which canvasses UK financial advisers on a quarterly basis, also found that more than a quarter (26 per cent) of IFAs are ‘very favourable’ towards emerging equities – up from 14 per cent in the last quarter.
 
For the second time, the survey also looked to gauge investment sentiment towards Frontier Markets such as Nigeria, Kuwait, Vietnam and Romania.  The latest survey found the number of intermediaries ‘very favourable’ towards the asset class up seven percentage points to 17 per cent, with overall favourability at 55 per cent.
 
Rod Aldridge, head of UK wholesale distribution at Barings, says: “We are encouraged by the strong sentiment towards frontier economies. This is a nascent asset class that Barings is very excited about as we believe these markets offer significant potential for long-term growth in a low-growth global economy.  Return on equity and dividend yield forecasts for frontier markets in 2015 are significantly ahead of developed and emerging markets, reflective of higher relative economic growth rates and early stage opportunities.”
 
The latest Investment Barometer showed increasing concern from the intermediary sector regarding the impact of China on the global economy, with 58 per cent believing slowing growth in China to be a major macro-economic challenge to investment growth over the next six months. This is up significantly from a third (35 per cent).  Additionally, 56 per cent are also concerned about the impact of the Russia/ Ukraine conflict, the first time this has been raised by intermediaries and far ahead of other concerns such as Eurozone growth problems (27 per cent) and overleveraged economies’ ability to reduce debt (49 per cent).
 
Aldridge says: “Our research shows that interest in emerging markets as an investment opportunity is recovering.  The short-term outlook for emerging markets remains challenging, as evidenced by the recent events in Thailand.  However, on a long-term basis, we strongly believe that Asian and emerging markets will continue to grow and develop.”

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