Investors are still flocking to the emerging markets in search of returns, but there has been a lot of commentary recently debating whether a bubble is forming in the region. Certain asset classes and sectors, like consumer stocks and property, have been dubbed relatively ‘pricey', while others have warned China could see a surge in inflation.
These issues highlight investors should not just blindly pile into the increasingly popular emerging markets in the belief that they cannot be burned and returns will come flooding in.
ETF investors need to do their research and consider the types of fund available, along with the exposure they provide to the region. Cap-weighted indices can be dominated by a few of the largest stocks in certain countries, meaning exposure is less diversified than investing in an index might suggest. This has led to greater demand for new ways of gaining access to the region, which Helen Fowler looks at in this month’s cover feature. She explores issues relating to existing indices and the development of benchmarks with different weighting methodologies.
Even though ETF providers launch products to fulfil their core offering and provide investors with building blocks for exposure, the recent flurry in emerging market fund issuance reflects appetite for tapping these countries and sectors. With the growing range of new indices, at least investors have an expanding tool box to use for selective market access.
Emma Dunkley, Editor
‘Important to have an anchor’
Report to be written by TPR
Lack of innovation for solutions
Some 2,000 consumers affected