Emerging markets turning a corner?

CLEARLY this year has been challenging for investors in emerging markets, which have generally underperformed developed markets. However, we have seen recent data showing that the trend of asset outflows may be reversing as more investors are putting their money back to work in emerging markets.

This is encouraging to us, but even if the type of volatility we saw this summer flares up again, by no means do we feel that it is time to abandon the asset class. We consider many of the factors driving recent volatility in emerging markets to be temporary and compounded by typically low summer liquidity - thus we believe that we have grounds to be optimistic in the longer term.

In our view, regardless of short-term investor shifts in sentiment, emerging markets simply cannot be ignored. They are a significant part of the global economy today in terms of world land mass, population, gross domestic product (GDP) and equity market capitalisation.