High time for low debt and fast growth

Emerging markets promise great rewards for investors as commentators predict that these economies will account for two-thirds of global economic growth over the next five years.

JAMES DOWEY is the investment director  and chief economist  at Neptune Investment Management

Looking at the key emerging economies on a shorter-term, tactical basis, Brazil is cyclically at a growth peak and some downward economic momentum is likely in the months ahead, following the election run-off.

Russia, in contrast, has lagged many other emerging economies in recovery but GDP growth there is above 5% year-on-year, and there will be further positive momentum.

India faces cyclical inflationary problems owing to strong demand growth, capital inflows and commodity prices, and in the short term will need to prioritise addressing these. However, in the longer term, the important point is that the economy appears to have maintained the potential to grow at close to a double-digit rate on this side of the global crisis.

The Chinese authorities have been tightening throughout 2010 following high growth in the second half of 2009, particularly in the housing market. A loosening cycle is not too far into 2011 and investors should treat this as a good entry point to buy Chinese equities with a view to holding over the long term.

Since the financial crisis the balance of the world economy is changing rapidly. Investors should allocate assets accordingly.