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.

Indonesia policy reform

Source: Google images

The World Bank praised Indonesia’s recent reforms, including higher public infrastructure spending and deregulation measures to lessen strict trade and investment policies, for maintaining the country’s resilience and allowing the government to diversify economically.

Since September 2015, the government’s has announced numerous policy reforms. Some sectors — in particular, trade and investment policy — witnessing a shift towards deregulation and have helped to maintain investor confidence in the country, hence Indonesia’s resilience against limited investment due to slowing global demand and volatility in the global financial market.

Moving to Manufacturing

Rodrigo Chaves, the World Bank’s Country Director for Indonesia, said global economic headwinds, including the consistently low commodity prices and the sluggish global trade, have forced Indonesia — a commodity exporter country — to expand into sectors other than mining and commodity, such as the manufacturing and service sectors.

Indonesia’s manufacturing operations are dominated by assembling and blending, which makes the country vulnerable to changes in multinational corporations’ global strategies. The country’s global share of manufacturing has remained at around 0.6 percent over the last 15 years.

“This is the right time to improve Indonesia’s manufacturing sector,” said Ndiame Diop, the World Bank’s Lead Economist for Indonesia. “Now is a critical moment for Indonesia to implement further reforms that will enhance the competitiveness of its manufacturing and services sectors, especially tourism.”

The World Bank kept its March prediction that the Indonesian economy will grow 5.1 percent this year.

Earlier this month, the Bank downgraded its global growth forecast to 2.4 percent from the previous 2.9 percent. Private consumption and public capital spending are projected to support Indonesia’s growth this year.

“Indonesia’s policy reform is the foundation of our economic resilience. I can’t stress this enough,” said Trade Minister Thomas Lembong.

A version of this appeared in Jakarta Globe on June 20. Read the full article here.