Smaller Asian nations, namely Hong Kong, Singapore and South Korea, will lead global growth over the next year, asst management, private equity and hedge fund executives said in a survey conducted by RBC Capital Markets.
Sixty-nine percent of the 108 asset management executives surveyed expect Asian equity markets to rally over the next year, and 73% said smaller Asian economies have better prospects for growth in the next year. This is followed by 66% pointing to India, China (65%), Russia (51%), Africa (44%), Europe (43%), North America (42%) and Japan (27%).
“Emerging markets have led global growth for the past several years, and asset managers around the world believe they will continue to do so,” said Marc Harris, co-head of global research at RBC Capital Markets. “However, it is quite surprising that asset managers see smaller Asian economies surpassing China and India in terms of growth prospects.
“The emerging markets are growing at different rates. Investors are recognizing the need to look beyond the four traditional emerging markets and are now looking to intraregional differences in search for yield,” Harris said.
Asset managers are far less enthusiastic about European markets, although their outlook has improved. Twenty-eight percent expect the markets to fall, down from 40% who thought so in May. In addition, 30% expect the Euro to rise in value, up from 16% in the previous survey.
Expectations for gains in the U.S. equity market have fallen, with 54% expecting gains, down from 66% in the previous dollar. Likewise, 53% expect the dollar to fall in value, up sharply from 24% in the previous survey.
Nonetheless, asset managers are more optimistic about seeing a reduction in inflation, with 18% expecting a reduction, up from seven percent in the previous survey.
“The dramatic swings in sentiment captured by the RBC survey illustrate the ongoing volatility and complexity of economies and financial markets,” said Richard E. Talbot, co-head of global research at RBC Capital Markets. “Asset managers and investors are increasingly discriminating in their portfolio allocation, taking a more nuanced approach to investing, looking for alternative indicators and conducting appropriate analysis and risk management.”