Emerging Markets Equities: Overweight amid ample liquidity

According to the Investment Spotlight named Emerging Markets Equities from Axa IM, there is an overweight amid ample liquidity. Franz Wenzel argues in favour of emerging market equities amidst a more dovish monetary policy dictated by fears of an economic slowdown. Central banks in emerging markets are currently weighing more economic growth compared to inflation. Furthermore, prospects for earnings in emerging markets will become more favourable within 2012, underpinning a relative valuation advantage vis-à-vis developed markets.

Towards emerging markets equities remains at best mixed. No wonder, given that this equity segment was strapped to a roller coaster in the course of 2011.
The key points of this document show that the global economic backdrop will remain lacklustre, which should help to alleviate some of the inflationary pressure in emerging markets, post emerging markets will continue to lower interest rates, which will subsequently be the most important driver for their equity markets.
Also Axa IM expects the negative earnings trend to swing to the upside toward mid-2012. And valuation is supportive, but a non-negligible part comes from Central and Eastern Europe (CEE), which we see at risk due to its significant exposure to the euro area.
Three important risks stand out: stronger than expected inflation; a sudden liquidity squeeze, and the persistence of elevated beta in the markets.


More information: www.axa-im.com