Investors are waking up to the structural differences between countries classed as emerging markets and are becoming less inclined to treat them as a homogenous group, according to a survey published on Monday.
The study by think-tank Create Research and asset manager Principal Global Investors showed that after suffering losses in recent emerging market volatility, many investors are now scrutinising individual countries more closely.
The survey of 700 pension funds, sovereign wealth funds, consultants and asset managers in 30 countries with combined assets of USD 29.7 trillion showed that the percentage remaining optimistic about the asset class nearly halved in two years.
“Investors have not lost faith in the emerging market story; they are simply questioning it. The scales have tilted somewhat from 2012 to 2014,” the report said.
The percentage of so-called “believers” in emerging markets fell to 20 per cent from 38 per cent between 2012 and 2014, while “sceptics” increased to 28 per cent from 18 percent.
When the United States` Federal Reserve began winding down an $85 billion-a-month money printing programme this year, emerging markets started to suffer asset price volatility amid fears that countries reliant on foreign investment to plug their balance of payment gaps would struggle.
Investors nursing losses from the ensuing turmoil are now more likely to examine countries and their economic benefits on a case-by-case basis.
Countries identified as capable of pushing through economic reforms are seen as most attractive, the report says, with more than a third of respondents identifying China as able to deliver strong returns over the next three years.