Emerging Markets Haven’t Lost Their Luster, Demand Persists for Experts in Latin America
Emerging markets have benefited over the past few years from low interest rates and bond yields, unprecedented risk tolerance, and plentiful global liquidity. Many of these conditions however have recently been called into question. The global credit cycle is becoming more restrictive as concerns over the U.S. credit and housing markets are spilling over into other areas. Investors appetites for risk also appear to be waning. But according to Bloomberg, emerging stock markets have exhibited an ability to withstand rising rates. The Morgan Stanley Capital International Emerging Markets Index is also up 15% in 2007, more than double the 7.2% gain in MSCI’s world index. And a recent Standard & Poor’s survey shows that money managers are more optimistic about the outlook for emerging-market stocks for the second half of the year. According to executive recruiting firm, A.E. Feldman, as developing regions, specifically Latin America, remain a focal point for investors, demand for financial services professionals with emerging markets expertise remains high.
In a recent Standard & Poor’s survey of more than 150 fund managers who oversee a total of more than $500 billion in developing markets, 48% of those polled say they are more optimistic about the outlook for emerging-market stocks for the second half of 2007. A whopping 73% also say they expect to have more money invested in emerging markets by the end of the year. S&P’s chief economist, David Wyss, concludes, “Our survey suggests that the momentum is still firmly with emerging markets.
As foreign market stocks continue to outpace domestic stocks, more investors are taking notice. Particularly hot has been the performance of emerging markets stocks. According to Bloomberg, from a low on March 12, 2003 through June 27, 2007, the MSCI Emerging Markets Index has almost quadrupled in value. And so far this year, exchange-traded funds (ETFs) tracking broad emerging markets have outperformed funds following developed international markets. Funds with exposure to Latin America have been among the top performers. The iShares S&P Latin America Index Fund is up 34%.
Latin America is home to half a billion people south of the U.S.-Mexico border. Investor’s Business Daily reports that the region has the potential to be the next hotbed of trade and economic growth. Between 1997 and 2020, Latin America’s real GDP is expected to grow 4.4% annually. That’s faster than Asia at 3.6% as well as the 2.8% global average.
Ernest Bachrach, chief executive of Advent Latin America, told AltAssets, “With the large flow of capital into the US, Europe and most recently Asia, investors are increasingly finding Latin America an interesting alternative, with fewer competing sources of capital and a more compelling risk-return profile.”
Still, Latin America has a lot of debt, making some plays there vulnerable to a domestic, or global, credit crunch. Other concerns on the horizon: oil prices and political turmoil. Nonetheless, growing markets overseas still offer the benefit of diversification and some analysts say they may be better bets for investors seeking more exposure to global growth and bigger returns. Thus, demand for investment professionals with expertise in developing countries remains high. A.E. Feldman says emerging markets opportunities are growing in the money management business. Firms want people who specialize in emerging markets valuation and professionals who can understand these regions on a ground level basis. The executive placement firm also adds that language proficiency in Spanish and Portuguese are highly sought after skills.
