Following a dismal 2011, emerging markets could see up to a 30 percent gain this year, assuming the sovereign debt crisis in the euro zone is kept at bay, according to Geoffrey Dennis, managing director at Citi.
“Clearly the wildcard is Europe,” said Dennis, managing director and global emerging markets strategist at Citi. “We’re assuming Europe doesn’t completely blow up with the euro breaking up, which is making investors more cautious, but if we get some slow improvement within Europe, we think markets are sufficiently cheap enough with interest rates starting to come down.”
Dennis noted that emerging markets are 25 percent to 30 percent cheaper than they were a year ago.
“[That] reflects how poorly emerging markets did over the course of 2011 so that’s going to be a positive factor for their performance this year,” he explained.
Specifically, South Korea is among his Dennis’ favorite emerging market picks.
“It looks like there will be broad stability in [North Korea]…it’s not a pleasant situation, but I don’t think it will have a big negative impact on the South Korean equity market.”
Dennis noted that South Korea is “relatively underowned” by foreign investors and less leveraged to the concerns over the global economy.
Dennis’ other “overweight” emerging market plays include South Africa, Peru, Thailand and China.
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