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Inflation pressure starts sapping strength of emerging equity markets

Rising inflationary pressure in emerging economies is beginning to sap their strength, though they should still make up a core part of any investment portfolio, according to AMP Capital Investors.

Tuesday, April 20th 2010, 8:29PM

by Paul McBeth

 

The firm's head of investment strategy, Jason Wong, said policy-makers in emerging markets are already beginning to tighten monetary policy settings, mainly through quantitative measures rather than hiking interest rates, to counter emerging inflationary pressures.

Still, AMP Capital Investors, which manages about $100 billion in funds worldwide, has only just separated emerging equities from its global equities portfolio, and their volatility means they are not assets the firm would speculate with.

"The market is very hard to pick returns for, with such a wide variance, and is not a lever we're looking to actively pursue anyway," Wong told a media briefing in Wellington. "It should be part of a core holding rather than mucking around the edges."

Wong said the price-to-earnings ratio in emerging markets was trading on a par with the developed world after trading at a "massive discount" historically.

Emerging equity markets have been the darling among investment funds for some time with big returns on offer,thanks to the prospect of rapid population and economic expansion in regions such as South-East Asia and South America.

 

Paul is a staff writer for Good Returns based in Wellington.

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