The slowdown in developed market growth is making emerging markets increasingly attractive to institutional investors, says a new report from the Economist Intelligence Unit. The search for growth: Looking to emerging markets, written by the EIU and sponsored by BNY Mellon, examines how perceptions about emerging market investments are changing in response to global economic turmoil.
The research suggests that many investors are prepared to stay the course in emerging markets despite excessive turbulence. Institutional investors say that even if growth in emerging markets slows, it seems likely to exceed that of the developed markets for some time to come. They seem prepared to ride out the inevitable volatility and setbacks in exchange for participating in emerging markets' superior growth.
Other conclusions of the report include the following:
· Investors believe relative risks are changing. Many investors feel that the developed markets have become more risky while the emerging markets have grown less so. Political dysfunction, once seen as largely a legacy of dictatorship and colonial rule, is now a clear threat in the US and the euro zone as those governments struggle with enormous debt problems, wobbling domestic economies and increasingly angry electorates.
· Short-term concerns exist about liquidity and asset price bubbles. Many institutional investors worry that demand from foreign investors will simply exceed the supply of emerging-market investments available. If more developed market investors expand their emerging market exposures, their actions may trigger price bubbles or volatile boom and bust cycles.
· Worries abound that emerging markets will be affected by problems in developed world. Investors are concerned that emerging markets would suffer if demand from developed world customers dries up. Emerging nations are also major investors in developed world debt and equities and would be hurt by a developed market downturn. But some institutional investors believe a slowdown in growth would help reduce the risks that emerging markets will overheat.
The search for growth: Looking to emerging markets is the final paper in a series sponsored by BNY Mellon. The first paper in the series, The search for growth: Opportunities and risks for institutional investors, published in June 2011, was based on a global survey of almost 800 institutional investors and corporate executives conducted in March 2011. The report explored the potential for growth across a wide range of sectors, regions and asset classes. The paper was followed by The search for growth: Rethinking asset allocation, published in October 2011, which explored key trends in asset allocation and risk management.
The search for growth: Looking to emerging markets
Is available free of charge at
Press enquiries
Joanne McKenna, press liaison, +44 (0)20 7576 8188; joannemckenna@economist.com
Annabel Symington, deputy editor, +1 212 554 0659; annabelsymington@economist.com
About the Economist Intelligence Unit
The Economist Intelligence Unit (EIU) is the world's leading resource for economic and business research, forecasting and analysis. It provides accurate and impartial intelligence for companies, government agencies, financial institutions and academic organisations around the globe, inspiring business leaders to act with confidence since 1946. EIU products include its flagship Country Reports service, providing political and economic analysis for 195 countries, and a portfolio of subscription-based data and forecasting services. The company also undertakes bespoke research and analysis projects on individual markets and business sectors. More information is available at www.eiu.com or follow us on www.twitter.com/theeiu
The EIU is headquartered in London, UK, with offices in more than 40 cities and a network of some 650 country experts and analysts worldwide. It operates independently as the business-to-business arm of The Economist Group, the leading source of analysis on international business and world affairs.
About BNY Mellon
BNY Mellon is a global financial services company focused on helping clients manage and service their financial assets, operating in 36 countries and serving more than 100 markets. BNY Mellon is a leading provider of financial services for institutions, corporations and high-net-worth individuals, offering superior investment management and investment services through a worldwide client-focused team. It has $25.9 trillion in assets under custody and administration and $1.2 trillion in assets under management, services $11.9 trillion in outstanding debt and processes global payments averaging $1.6 trillion per day. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com or follow us on Twitter @BNYMellon.
