(Bloomberg) Emerging markets offer good long- term buying opportunities as economies globally improve, Robert Kapito, co-founder and president of BlackRock Inc., said. There is too much short-term thinking in investing and foreign investors should be diversified in order to survive this period of market volatility, Kapito said in an interview with Bloomberg Televisions Susan Li.
Kapito said the weakness in emerging markets is overdone and he expects equity markets to perform better than fixed income. The emerging markets are going to account for about 60% to 65% of the worlds growth over the next 20 years, said Kapito. If you are investing for the long term, this is a good opportunity to get reinvested into the emerging markets.
Investors have pulled out money from emerging markets amid speculation that the U.S. Federal Reserve will start to curtail easing policies as soon as this month, marking an end to cheap money inflows that had propped up asset prices from India to China and Indonesia. Those who had moved into developed equity markets have the ability to move back into emerging markets very quickly, Kapito said. Its a little bit of an overdone situation on the downside and were starting to see movements back in.
Investors have taken $22.1 billion out of emerging-market bond funds since the end of April, almost five times the withdrawal from U.S. corporate credit, according to data provider EPFR Global.
That reversed the trend that saw $58.8 billion pour into funds that buy emerging-market debt last year, chasing yield amid a U.S. stimulus program thats funneled more than $2.6 trillion into the financial system since September 2008.
The worst outflow from emerging markets has yet to be seen, said Jeffrey Rosenberg, BlackRocks chief investment strategist in fixed-income, said in a telephone interview with Bloomberg News. Losses for emerging-market debt have the potential to accelerate, he said, adding the rout may eventually present a buying opportunity.
Kapito expects equity markets to perform better than fixed- income markets. We do see improvements around the world, which will put pressure on fixed income, but that will actually help equities, he said.
Investors can take measures to mitigate risks on potential increases in interest rates by investing at the short-end of the yield curve and looking for securities that are less interest- rate sensitive, he said.
The U.S., which went into a recession five years ago as spiraling home values prompted a credit seizure, will probably grow by 2.7% next year and 3% in 2015 from 1.6% this year, a Bloomberg survey of 73 economists shows.