Outlook on Emerging Markets Dims

Managers of global funds believe profits of companies in emerging markets will deteriorate in the next year, according to a Merrill Lynch survey conducted this month, Daily News & Analysis reports.

However, only 4% think that emerging markets stocks are overvalued. With 71% reporting that they think emerging markets stocks are fairly valued and 36% overweight emerging markets, it appears that they are bullish on the market sector.

But the consensus on India, Chile, Poland, Africa, Israel and the rest of the Middle East is gloomy, particularly India. Forty-two percent ranked India as their least-favorite country among BRIC (Brazil, Russia, India and China) countries, up from 32% ranking it last in August.

However, global fund managers held out some hope that the Fed fund rate cut from 5.25% to 4.75% could boost profits and the market.

“The Fed cut, along with control over inflation and an improved political situation, has helped boost market enthusiasm,” said Amar Ambani, vice president of research at India Infoline. “A look at some of the advance tax figures also suggests that quarterly numbers of corporates are likely to be healthy.  The feel-good factor of the Fed verdict will continue for some more time, with increasing inflows in India where there are some very good investment opportunities.”

The staff of Money Management Executive ("MME") has prepared these capsule summaries based on reports published by the news sources to which they are attributed. Those news sources are not associated with MME, and have not prepared, sponsored, endorsed, or approved these summaries.