Expectations that emerging-market economies will be crucial to global economic growth have renewed investors' interest in emerging-market assets.
However, emerging markets as a group have evolved considerably from the unstable, high-debt economies that still dominate investor perceptions. Over the past several years, the macroeconomic policies of a number of key emerging-market countries have resulted in much stronger economies and balance sheets.
Debt-to-GDP levels are lower for the emerging markets as a group than for developed economies—and a recent International Monetary Fund study forecast that debt-to-GDP levels for emerging markets would improve slightly over the next few years, while developed-market debt levels, already above those of emerging markets, would grow.
Along with improved macroeconomic fundamentals, the diversity of opportunities tied to emerging markets has grown substantially over the past decade. They include investments in companies—both inside and outside of China—that are likely to benefit from that country's robust growth.
Another significant area of growth is in firms benefiting from a shift in some emerging economies away from export-oriented industrial and commodity sectors to more sustainable domestic consumer and service sectors.
Finally, a potentially overlooked opportunity is in developed-market companies that are likely to benefit from rising demand in emerging markets, such as pharmaceutical firms.
In short, we remain convinced that the best way to understand—and take advantage of—emerging-market opportunities is through a global perspective.
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