The Case For Investing in Gems

Courtesy of The Financial Times, a report on the investment potential of Global Emerging Markets (GEMs):

In fact, emerging markets experienced strong inflows right through to December 2010, with an all-time high of £336m invested in October 2010.

With 2011 seeing its fair share of bumps and jolts, retail investors have continued to invest in the sector, with the IMA Global Emerging Markets sector experiencing net inflows of more than £650m so far this year. April was the best-selling month in 2011, with net inflows of £150m, according to the IMA.

In spite of this, however, the IMA Global Emerging Markets sector was the third worst-performing in the month to the end of September, with funds in the sector making an average loss of 9.9 per cent. Only the IMA China/Greater China and IMA Asia Pacific including Japan sectors fared worse, with funds in the sectors making an average loss of 13.6 and 10.5 per cent.

The IMA UK Index Linked Gilts, Technology and Telecommunications, UK Gilts, Japanese Smaller Companies and Money Market sectors were the only ones that managed to make a gain in September, showing how tough the past couple of months have been.

Nevertheless, in the long term, IMA Global Emerging Markets has outperformed and is the second best-performing sector in 10 years, with funds in the sector returning on average 277.1 per cent.

It comes as no surprise therefore that the case for Gems continues to grow. With the world population expected to increase by an estimated 200,000 people a day, according to the United Nations, there’s plenty of growth to utilise.

If nothing changes, by the end of the century the population of Zambia, in Africa, is expected to triple and India is predicted to overtake China as the most populated country on Earth.

According to the Frontier Strategy Group, while China’s growth may be slowing down, India’s is increasing, and by 2014, India’s growth rate will outstrip China’s, at 8.6 per cent compared with 8.2 per cent. This has prompted fears of a hard landing for China.

For much of the past year, China’s policymakers have been grappling with how to temper sharply rising asset and consumer prices and dampen the ill-effects of an unprecedented economic stimulus following the global financial crisis – without torpedoing strong economic growth.

China first set about reining in credit in April 2010, following a record RMB12.2trn (£1.1trn) surge in bank lending since the start of 2009, according to China Economic Research.

The Frontier Strategy Group predicts that China will have trouble in tackling its public debt and its debt to GDP ration will rise from 16.2 per cent in 2011, to 16.3 per cent in 2012, 2013 and 2014, before going back down to 16.2 per cent in 2015.

Inflation concerns also remain, prompting the Chinese government to stress that tackling inflation is now its number one priority.

This entry was posted on Wednesday, November 16th, 2011 at 6:59 pm and is filed under Uncategorized.  You can follow any responses to this entry through the RSS 2.0 feed.  Both comments and pings are currently closed. 

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Wildcats & Black Sheep is a personal interest blog dedicated to the identification and evaluation of maverick investment opportunities arising in frontier - and, what some may consider to be, “rogue” or “black sheep” - markets around the world.

Focusing primarily on The New Seven Sisters - the largely state owned petroleum companies from the emerging world that have become key players in the oil & gas industry as identified by Carola Hoyos, Chief Energy Correspondent for The Financial Times - but spanning other nascent opportunities around the globe that may hold potential in the years ahead, Wildcats & Black Sheep is a place for the adventurous to contemplate & evaluate the emerging markets of tomorrow.