Emerging equity markets will lead a global recovery because the health of their economies did not warrant the large sell-off seen in the last 18 months, Aberdeen Asset Management head of global emerging market equities Devan Kaloo said.

"The problems in emerging markets are cyclical in nature. There is no major structural imbalance here," he said. "That means that the recovery will be led by emerging markets."

Kaloo, who is based in Aberdeen's London office, spoke yesterday at a briefing for financial planners in Sydney.

Up to 2002, international investors were largely uninterested in emerging market assets and these assets traded at a discount.

But the adjustment these markets went through during the Asian crisis between 1998 and 2002 laid the foundations for their outperformance in the years that followed.

The global financial crisis affected emerging markets later than developed economies, but they are now trading at prices that do not reflect their underlying value, Kaloo said.

On the other hand, the developed countries have more fundamental problems. Their problem is not a shortage of capital, but highly-leveraged balance sheets, Kaloo said.

He estimates it will take between three and five years to work through the problem of leverage.

"The stimulus packages means less people go broke, but it does not mean growth," Kaloo said.

Emerging markets with large domestic economies, including China, India and Brazil, will be the first ones to recover, he said.