Emerging markets: Looking ahead in 2010

Emerging markets have made a strong start to the year. Chris Palmer, Gartmore's Head of Global Emerging Markets, reports on the main themes arising from his recent trip to Taiwan.

Companies are cautious about the second half of 2010 given the diminishing impact of Chinese and American government stimulus packages and a fear of increasing regional interest rates. From Asia's perspective, there is an uncertain outlook for the European Union given the issues surrounding Greece and low growth prospects negatively impacting the region's exports to Europe.

Further growth in China has become a source of concern for Asia's manufacturing companies hoping to take advantage of China's cheaper labour force. In the Guangdong province, the minimum wage has already been raised by a record amount and Chinese manufacturing companies are facing larger wage bills. As a result, manufacturing companies are relocating from the relatively wealthy coastal regions to lower cost regions in the interior of China.

The continued progress of the ECFA framework (cross straits initiative) in Taiwan means that trade flows and relations between Taiwan and China are improving rapidly. With daily flights between the key cities of Shanghai and Taipei, many have commented that Taipei's ageing infrastructure is in need of improvement. Urban renewal for Taipei is likely to prove a key driver for the local economy over the next decade.