Why investors should continue to follow ‘center of economic gravity’ to emerging markets in the East
The MSCI Asia Ex-Japan Index has jumped 13.03% year-to-date, outperforming the All Country World Index by a factor of two to one
Speaking to CNBC, Michael Power of Investec Asset Management explained why billions of dollars have been flowing to Asia, particularly emerging markets.
Power likened the shift of the global economy towards Asia, and accompanying concerns about China, to the emergence of the US in the late 19th century. Many of the same criticisms now directed at China regarding access and regulations were levied against the US long ago.
“One has to go back, if you want, to history and look in 1870. That’s exactly what people were saying about the United States and we know what happened next. If you avoided the United States, you did badly,” Powers reminds investors.
While a new World Bank report released this week warns that monetary tightening in the US and protectionism around the world pose risks, growth in the Asia-Pacific should stay on track.
Powers says there are two approaches you can take to Asia, cappuccino and espresso. You can start out with the cappuccino route and invest in the Nestles and Univilevers, companies diversifying into Asia, but ultimately you will want to go direct.