Prospering with emerging markets

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Principal Global Perspectives

The global emerging markets landscape is changing rapidly, with the outstanding returns investors have seen in the past becoming increasingly difficult to secure.

According to Principal Global Investors, despite the volatility, emerging markets are a strategically important part of long-term investment portfolio and determining the right market exposure is more critical than ever.

The October issue of Principal Global Perspectives focusses on emerging markets, providing a compilation of articles from four of its boutique asset managers on what they see as the challenges and opportunities in this progressing asset class.

Key points:

  • Waiting for growth no longer, emerging markets take action, by Milhail Dobrinov, Portfolio Manager, Principal Global Equities: “So how are emerging countries to prosper, and emerging stocks to regain their edge and outperformance in this new environment? The answer lies in applying a large dose of self-help; not just waiting for growth to happen along, but taking steps to create it. That means boosting productivity growth, reducing operating and capital costs, improving profitability, and returning more capital to shareholders. At the country level, this means structural reforms; at the firm level it requires prioritizing return on capital, rather than growth at any cost. These changes are necessary, but neither of them will be easy or popular, and some attempts will stumble.”
  • Emerging markets forge ahead … on differing paths, by Ivailo Vesselinov, Economist, Finisterre Capital: “Emerging economies with large financing needs are likely to remain under the microscope as major central banks rein in global financial liquidity.”
  • What to watch in emerging markets: aggregate ROI, by John Birkhold, Partner, Origin Asset Management: “What matters is not how fast a company is growing, per se, but the level of ROI that firms in aggregate have been able to achieve.”
  • Emerging markets debt: as asset class evolves, by Nick Varcoe, Portfolio Manager, Principal Global Income: “Institutional buyers are likely to remain active in the emerging market corporate space, particularly as long as this attractive yield pickup over developed markets continues to exist.”

To read the full report, click here.

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