Are we ready to face the emerging markets again?

A decade ago there was a new hype about investing in “emerging markets”. And over the following years it seemed that everybody with a healthy savings fund was in the process of building a “property portfolio” that included worldwide destinations as varied as Bulgaria, Northern Cyprus and Thailand. Dr Nandu Narayanan, Manager of the C.I. Emerging Markets Fund was quoted as saying “Fundamentally, there are many positive issues: Values are exceptional, some of the best growth and earnings stories in the world exist in the Emerging Markets and even the liquidity is reasonable.” But in his interview with Jim Yih (dated 2001) he continues by saying “the emerging markets are like roach hotels . . . it's pretty easy to get in but when everyone else is trying to get out, it is near impossible to do so."

However, whilst there are some investors who will now remain forever shy of the property industry aside from a safe 2-up, 2-down in a good catchment area, 2010 did start to hear a faint hum of renewed interest for the less developed nations.

Fund Managers at a Reuters summit recently picked emerging markets as a top bet for next year, predicting good returns thanks to fast growth. Many eyes are looking toward Latin America and the “Powerhouse” of Brazil that continues to develop, relatively unscathed by global difficulties. But Brazil presents a good example of a country with plentiful opportunity if the right project is selected (such as the Amazones, Chapada Diamantina), or, adversely, ample risk if investments are misinformed.

Whilst many of the construction cranes that used to be firmly pointed at the Middle East are currently directed at India (having positive indicators from 2010 with a 12.4 percent rise) its future potential is limited due to a mostly domestic-driven market. However, UBS analysts suggest Taiwan as a place to put the clever money thanks to a low market evaluation and heavy exposure to technologies.

The speculative opportunities of Africa are also being considered due to rich resources and good links with the East.

In general, emerging markets are a cyclical affair. There are always booms and so, in balance, there will always be a degree of bust. The key to a successful investment is timing and, equally importantly, to determine a sound strategy that also protects against potential market downturn.

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