Investors expect to increase their allocations to emerging markets to the extent they will be overweight by the end of 2025, according to research.
Dragon Capital found almost nine in ten of professional equity investors expect inflows into emerging market equities to increase over the next three years and that nine in ten predict their fund allocation to emerging market equities will be overweight by the end of next year.
The study included expectations from pension funds, family officers, insurance asset managers and wealth managers who collectively manage around US$1.64 trillion.
It found that around 39% currently think that the fund they help to manage is underweight in emerging market equities – with a further quarter saying their allocation is balanced.
Nine in ten said they had already increased their allocation to emerging market equities since the start of 2023 and about a fifth said the increase was “dramatic”.
This increase in exposure to emerging markets comes as almost all (98%) of professional equity investors in the study think that growth in emerging and frontier markets will outpace that of developed markets over the next five years, with most of them considering the markets to be undervalued and many seeing these markets as gaining from advances in technology.
Quynh Le, portfolio manager of Dragon Capital’s Vietnam Equity (Ucits) Fund, argued Vietnam stands out as an example of why emerging markets offer good prospects.
“Vietnam is truly embracing the technological era, and the domestic banks are at the helm of this exciting digital revolution. MB Bank, for example, the largest private bank by assets at $38.9 billion, has seen its number of e-bank users surge to 25 million from just 11 million in just two years,” she said.
Additionally, in a nation of 100 million, the increasingly tech-savvy middle class is predicted to expand by 37 million by 2030, presenting a fertile landscape for sustained economic growth, Le added.
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