Time to start shifting assets to emerging markets: SocGen

IT is time to start shifting money back to emerging markets, especially Asian stocks, said French bank Societe Generale. The bank upgraded its emerging market (EM) equity and 10-year government bond allocation from zero per cent at end-2013 to 5 per cent, each.

In a second quarter asset allocation report released yesterday, SocGen, which called for caution on EM assets as early as March 2011, said that the assets have "switched from 'priced for perfection' to value or even deep value". "We believe a lot of bad news is now already priced in. Therefore, we recommend rebuilding some exposure," it said.

Emerging markets enjoyed a decade of strong gains from 1999 to 2009, and recovered quickly after the financial crisis. They have suffered from massive outflows since last May, when fears of rising US yields and slowing China growth caused investors to flee back to the developed world. This time, SocGen is not calling for an overweight on EM. In fact, it remains underweight EM equities, and neutral on EM government bonds.