China: is it too late to catch the Orient Express?

8th April 2010

Looking at the conversations on the likes of moneysavingexpert.com, although it's clear that the jury is still out, the general consensus seems to be that the emerging market ride will be bumpy but worth the volatility.

As QuietDragon puts it: "Whether you decide to invest in a China fund, a Greater China fund, an Asia ex. Japan fund, or perhaps an Emerging Markets fund, you are most certainly in for a bumpy investment ride, with rapid peaks and even more rapid troughs in the investment's changing value.

"However, if you are dipping your toes in the water with a single fund, and the value of the investment is a small proportion of your total savings and investments portfolio, I don't see any reason why you should be worried."

A more bullish Mikeyorks says: "I think the markets have mainly factored this [volatility] in …. and partially why China is down 10% over the last couple of months."

So, do emerging markets still offer value?

Some of the growth figures from these countries last year are eye-watering and even more so when you think they were bouncing back from the credit crunch sell-down.

Of the four so-called Bric nations, China was actually the one that lagged with a mere 60%, trailing 121% from Brazil, 100% from Russia and 101% from India.

A recent story from The Times highlights the dominance of these products in recent years.

According to figures from Investment Life & Pensions Moneyfacts magazine quoted in the story, eight of the top ten unit and investment trusts over the last five years are emerging market focused – with one general fund, four Latin American, two Russian and one Indian.

The other two were mining and gold portfolios, both of which clearly benefitted from the emerging market story in the shape of massive commodity demand.

So is it too late to jump on board?

Consensus suggests certainly not, from a macroeconomic perspective; although now might not necessarily be the ideal time to buy either. 

Looking at it purely from an economic standpoint, the case for emerging markets has never been stronger and talk of the east-west pendulum swinging to the former no longer sounds far-fetched.

These regions boast larger and younger populations, providing a ready workforce and massive – as well as largely untapped – consumer markets.

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