FTAdviser Advantage  

Investors flock to emerging markets

Investors flock to emerging markets

Clients have chosen to have the majority of their equity exposure in emerging markets, ahead of both US and UK markets.

According to a poll carried out by FTAdviser Advantage, 45 per cent of advisers who voted said their clients were investing heavily into emerging market equities.

Some 33 per cent selected US equity markets, while 22 per cent had chosen UK markets as their preference.

Gavin Haynes, managing director of Whitechurch Securities Wealth Managers, said: “In a low growth world, the opportunities provided by the high levels of growth from emerging markets are enticing to investors.”  

The poll reflects this opinion as almost half of advisers opted for such markets.

Patrick Connolly, certified financial planner at Chase de Vere, expressed a different stance on the subject.

According to Mr Connolly, the poll results were in contrast with the “vast majority” of asset allocation models. He added the models showed UK investors have their “biggest equity weightings in the UK, as this is the domestic market, or in the US as the largest market”.

The poll results showed a low home-bias, with just more than a fifth of advisers opting for the UK.

The Brexit vote is likely to have had an impact on this result as the “high level of political uncertainty” has led investors to reassess the potential of the home economy, said Mr Haynes.

Mr Haynes added although many retail investors have chosen to stay away from UK stock markets, UK exporters have benefited from the weakening pound.

An unforeseen result was a vote of 0 per cent for both the European and Japanese equity markets.

The profitability of Japanese markets is one that has been debated by financial advisers.

Luca Paolini, chief strategist for Pictet Asset Management, said Europe and Japan markets are “favoured over the US”.

This is because Japan has a rapidly emerging economy, in addition to the expansionary monetary policy the Bank of Japan has been pursuing.

Mr Paolini added: "Emerging market equities offer long-term value and should benefit from a weaker US dollar, which yields opportunity for sizeable equities."