JPMAM reveals long term optimism for emerging market equities

The emerging market success story is set to continue, while recent underperformance is not indicative of the longer term trend and investment opportunities ahead, according to Richard Titherington, Chief Investment Officer of Emerging Markets Equities at  J. P. Morgan Asset Management.

Titherington has indicated that there has been significant expansion in the range of investment opportunities in the emerging markets infrastructure sector and prospects for strong overall long term growth remain positive, despite short term political and inflationary risks.

Titherington comments: "Emerging market countries will benefit from sustainable long-term trends in the coming years and infrastructure will play a significant part in future growth. Urbanisation is driving increased productivity and prosperity across emerging markets, whilst the cement and steel sectors have seen a high volume of growth of late and will continue to face a greater demand from these countries.

"China in particular has plans to create the world's fastest high-speed rail network while Brazil will host the forthcoming World Cup in 2014 and Olympics in 2016. Current inflationary concerns are cyclical and temporary and investors should look to consider the overall valuations in countries such as China, where the number of prospective returns and attractive companies to invest in remains high. Emerging market companies currently account for 15% of global corporate profits and, with over 700 emerging market infrastructure related companies available to investors, the long term outlook for growth remains positive.

"However, there are still short-term influences to consider. Political risk is a constant undercurrent for emerging countries as we have seen by recent events in the Middle East and this could lead to short term volatility. However, valuations are important, as an investor, and we have seen improving price to earnings ratios thanks to earnings exceeding expectations at a stock specific level. In addition, inflation is a growing threat that has rippled across both the developed and emerging worlds. Nevertheless, I am optimistic that it will be the countries with flexible exchange rates, such as South Africa, Korea and Turkey, that will be better equipped to deal with the threat of inflation."

Titherington continued: "We have witnessed a dramatic change in asset classes over the last 20 years with the emergence and growth of the BRIC economies and the case for future prospects in emerging market equities also looks positive. In my view, we are half way through a forty year rebalancing period in global equities. Emerging markets could account for 40% of global equities in the next 10- 20 years, compared with just 12% today. When considering the long term investment opportunities available to emerging market investors in stock specific sectors, including infrastructure, the period for long term growth is by no means over and there is plenty to look forward to in the coming years."

The J.P. Morgan Emerging Markets Infrastructure Fund, managed by Richard Titherington, aims to achieve long-term capital growth by investing primarily in emerging market companies relating to infrastructure opportunities and is suitable for investors looking for long term emerging market exposure. It invests in companies across the industrial, material and energy sectors, including raw materials, utilities, power, water and transport. The JPM Emerging Markets Infrastructure Fund allows investors to explore opportunities not only in the BRIC economies of Brazil, Russia, India and China, but across a wealth of emerging market countries such as South Korea and Taiwan. The fund has been awarded an OBSR A rating and has returned 55.08% since inception in September 2008.