For some time now, we’ve been talking to our clients about investing in emerging markets. There is no doubt that emerging market investments should form an integral part of a ‘growth’ portfolio.

Emerging markets are changing the way the world works by developing into global powerhouses.

Rapid economic growth

Over the next 5 years growth in emerging economies is still expected to outpace the developed world. This growth is fuelling increases in household incomes in places like China and India where nearly 60 million people are joining the ranks of the middle class each year.

High savings rates in Asia

Despite rising consumption, households in emerging Asia save 17 percent of all disposable income, that’s roughly four times the savings rates of the US and much higher than the average for the developed world. High savings rates means less borrowing at all levels and strong support for investment in capital markets.

Urbanisation

The world’s urban population is growing by more than 70 million people each year. China already has over 100 cities with 1 million people and is expected to have over 200 of them by 2025. This urban migration has overwhelmed existing infrastructure like roads, railways, sanitation and electrical services. The development of this critical infrastructure will require vast amounts of copper, steel, concrete and increase the demand for all commodities.

Desire for social stability

Governments need to provide opportunities for people to improve their quality of life. Many governments have found the key to social stability is focusing on job creation which establishes a path of upward mobility for citizens.

Natural resources wealth

Many of today’s most promising emerging nations sit atop some of the largest oil, metal and other valuable resource deposits in the world. Many of these nations have teamed up with private and/or foreign enterprises to bring these resources to market. Revenue generated through taxation and direct ownership allows for these governments to build infrastructure, create jobs and pursue other economic opportunities.

Corporate transparency

A history of corruption and political turmoil has given way to higher standards of corporate governance in today’s globalised world. Though still far from perfect, the improved transparency and oversight has made important information available to investors and reduced uncertainty. By aligning themselves with international business standards and requirements, emerging nations will attract more foreign capital and better integrate themselves into the global marketplace.

Further enquiries, please contact:

Roger Sutherland

Director, Grant Thornton Wealth Management Ltd

T +64 (0)9 308 2974

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Issued on: 31 August 2010