CPD: The investment potential in emerging market equities
Emerging markets (EM) are highly inefficient. Complicated governance structures, evolving macroeconomics and immature institutions result in elevated stock price volatility. This creates significant alpha generation opportunities, as well as challenges, for active investors in EM equity markets.
EM specialist Ashmore believes that companies with structural competitive advantages delivering growth are best placed to benefit from EM secular growth drivers, as well as being well placed to navigate economic and market drawdowns.
Furthermore, opportunities to generate alpha are amplified by the fact that EM companies are poorly researched, especially for their medium-term fundamentals. Consequently, businesses of enduring quality are often undervalued and trade at prices that fail to reflect their ability to sustain high returns over the long term.