Emerging Markets More Appealing In A Post Brexit World


In a post Brexit world, emerging markets are suddenly looking very attractive for investors, reports CNBC.

Once shunned by investors for being volatile, emerging markets have gained a certain appeal following Brexit, which sent shockwaves to global markets after the UK decided to leave the European Union.

Some fund managers have low exposure to emerging markets, having pulled out of them as concerns about China’s sharp slowdown weighed on the outlook. Following Brexit, a global flight to quality trade has helped send the S&P 500 to all time highs and long end US treasury yields to record breaking lows.

Analysts are concerned about the limit of gains in US assets.

If the dollar stays steady, market strategists see opportunity in diversifying to emerging markets where growth forecasts remain higher than in developed markets.

According to BlackRock Investment Institute, having a degree of exposure to emerging market is part of having a diversified portfolio. Currencies and trade balance have adjusted following Brexit, and markets in Southeast Asia stand out in an environment of lagging global growth.

The World Bank expects emerging markets and developing economies to grow at a 3.5% rate this year, while advanced economies should see just a 1.7% rate

Exposure in the Southeast Asian market, or other emerging markets brings an element of diversification which can help buffer one’s portfolio against market downturns possible at any period of time. The interest in emerging economies can go onto positively impact all sectors and industries, whether it’s tech, healthcare or finance.

The next investing mega-trend may be adoption of middle-class lifestyles on a global scale with huge implications for global providers of goods and services.

The downturn of the West’s venture capital market is also a post Brexit reaction, as investors in UK startups are wary of the change. The world has shrunk according to President Barack Obama but emerging markets in the Southeast Asian region may be lucky enough to come out of a global slowdown as the unlikely winners.

A version of this appeared in CNBC on July 14. Read the full version here.