Funds for Emerging Market Exposure

Morningstar OBSR analyst Karine Glauser discusses some of the biggest, newest and best performers in the emerging market fund industry

Karine Glauser 15 January, 2013 | 8:00AM
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Emerging markets have been popular with investors for a number of years based on solid economic fundamentals, booming demographics and growing domestic markets. They have reaped the fruits of a decade of reform and orthodox monetary and fiscal policies, initiated after the Asian crisis in 1998, and they have shown resilience at the height of the credit crisis in 2008. In the aftermath of the crisis, they have been prompt to raise interest rates in the face of rising inflation and strong credit growth and this has been helpful in preventing their economies from overheating.

Emerging markets have become an intricate part of global markets via trade and financial flows and this has made them more dependent on global growth and more sensitive to global news flow and risk appetite

In the face of this success, some economists started to believe that emerging markets would ‘decouple’ from developed markets. But more recent events have proven that this is not yet the case. Emerging markets have become an intricate part of global markets via trade and financial flows and this has made them more dependent on global growth and more sensitive to global news flow and risk appetite. Whilst investors are keen to point out the strength of the Chinese economy and its role as the regional engine of growth, it would be hard to ignore the degree to which some economies such as South Korea and Taiwan are still heavily reliant on exports to developed countries for economic growth.

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Karine Glauser  is a fund analyst with Morningstar OBSR.