The trend for investment into emerging markets will remain at the forefront through 2013, headed by the Asian region, according to HSBC.
The year 2012 was a rollercoaster for investors and the issue remaining is whether institutional investors can change their investing habits to benefit from opportunity in growth markets.
HSBC head of global asset management Geoff Pidgeon explained that global growth is expected to be around 2.7 per cent over the next 12 months, up from 2.5 per cent in 2012.
“[The flight to emerging markets] is supported by the current valuations relative to long-term valuations,” Mr Pidgeon told InvestorDaily.
“From a country point of view, we see opportunity in China, Russia, Malaysia, Thailand, Turkey and Poland [which] are relatively cheap.”
The Brazil and South American markets are expected to demonstrate extensive opportunity on a profitability basis, he said.
“The Asian markets are trading at about 1.63 price to book, with a long-term average of around 1.7 to 1.8 per cent,” Mr Pidgeon said.
The region’s price to earnings (PE) ratio was around 14 per cent for the last five-year average. Today, trading is at 12 times earnings.
“So, from the valuation perspective we do see some opportunities [there],” Mr Pidgeon said.
But he warned that key issues going forward, such as the Eurozone, questions over sustainable recovery in Chinese markets and the US fiscal cliff, will continue to be a drag on global growth.
“People are [also] now questioning whether we will see better value in [global] equity markets. We [think] there will be better returns from equities going forwards in 2013,” he said.
