Economist David Hale told delegates at the 65th CFA Institute Annual Conference that steady increases in exports and capital spending, combined with favorable demographics, will allow emerging market countries to continue to grow their economies at rates superior to those found in the more developed economies of “old industrial countries.” Given the comparatively strong growth outlook, he argued, emerging markets warrant an over-weight position in investor portfolios.
In building his case, Hale noted that emerging markets have doubled their collective share of global GDP, exports, and capital spending over the past two decades, with China playing a key role in this growth. China displaced Germany two years ago as the world’s largest exporter of tradeable goods, amassing foreign exchange reserves of $3.3 trillion today (versus $3.4 trillion for all developed countries combined).
Population trends also favor investment in emerging markets. Hale pointed to aging and declining populations in Europe and Japan over the coming decades as just one reason for caution in those markets. While Korea, Taiwan, Hong Kong, and even China will also see declining populations over the next decade, other parts of Asia will see strong growth, including the Philippines, Indonesia, and India. And Africa represents another promising region for growth.