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Investor optimism in emerging markets on the rise, says Franklin Templeton survey


Over half (55 per cent) of UK investors think that now is a good time to invest in emerging markets, a recent study by Templeton Emerging Markets Investment Trust (TEMIT) has revealed.

The third instalment of a study, which examined the current attitudes, sentiment and perceptions towards emerging markets, found that not only are investors optimistic about emerging markets, a quarter (25 per cent) have seen their view on the asset class become more positive over the last 12 months.
Of those investors whose views have become more positive, 42 per cent cited the benefit of emerging markets being a long-term play to help grow their investments. Almost a third (30 per cent) cited the emerging markets shift towards innovation, technology and consumption as a reason for their renewed optimism, believing this has resulted in high-growth investment opportunities. This was followed by 29 per cent who felt that rising consumer spending is driving the growth of emerging markets and 29 per cent who believe that emerging markets currently offer better returns than any other asset class.
A third (33 per cent) of those who currently invest in emerging markets expect to make higher returns on their investments in the next 12 months, compared to the previous 12 months, and over half (55 per cent) expect to make similar returns. Just 8 per cent of investors expect to see lower returns.
Of those who expect higher or similar returns, 46 per cent cite the reason that emerging markets offer undiscovered opportunities and a further 42 per cent think that they will continue to outperform developed markets. 42 per cent of investors also believe the rapid growth of emerging markets is a reason for higher returns, and 39 per cent feel that investor confidence is returning to the asset class.
When asked about their outlook for emerging markets compared to other types of investments, such as US, UK or European equities, property and bonds, 46 per cent of investors picked emerging market equities as the asset class they were most positive about, coming in just behind gold (49 per cent).
Chetan Sehgal, portfolio manager, TEMIT, says: “We’ve seen a number of positive developments in emerging markets over the past 12 months. The Chinese economy remains on a fast growth trajectory, a number of countries such as Brazil, India and Argentina have undergone progressive political and economic reforms, and there has been solid performance across most emerging markets.
“It is welcome news that investors are optimistic about the opportunities in emerging markets and recognise the transformation that is underway. In our view, emerging markets still offer some of the best undiscovered opportunities in the world. Rapid economic growth alongside demographic shifts, technological innovation and increased household spending are providing us with a range of opportunities. And whilst the global environment occasionally presents us with unforeseen risks and challenges, a collection of fundamentally driven ideas help us navigate these, even in the fast changing world of technology.”

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