Australian insto investors restricting themselves to China

Australian investors need to think of investing in emerging markets as a whole, instead of restricting themselves to investing in China and India, according to the managing director of Rexiter, Murray Davey.

Australia’s resources and China’s increasing influence will make Australia much more linked into the Chinese and Asian economies than most other mature institutional markets, influencing Australian institutional investors to look to Asia and particularly China instead of the whole emerging market sector, Murray said.

But it was wrong to think of the emerging markets as just a proxy for China and India, he said. Places like Russia, Turkey, Philippines, Indonesia and Brazil were growing quite well and their share markets were growing quite large at the same time, he said.

The market crisis had clearly demonstrated the vulnerability of individual stock markets and it would be unrealistic to think individual emerging markets would head in a different direction from the general market, Davey added.

China and India are the big locomotives of the emerging economies, but they are not necessarily the places investors could make the most money in in the short to medium term, he said.

Smaller economies such as Russia, Turkey, Thailand, Mexico, and Indonesia offered the best opportunities in the short term as they offered cheap stocks and lots of opportunities. These smaller economies don’t fall into the category of more mature emerging markets such as Korea, which were driven by events in the developed world.

The percentage of the world stock markets represented by emerging markets has risen to 10 per cent or 11 per cent over the last 15 years, and the average pension fund has increased their exposure to emerging markets as a result, he said.