The Investment Case for Emerging Market Equities

14 May 2020

Emerging markets (EM) have experienced dramatic growth and transformation over the last three decades. The Emerging Market investment universe represented a mere 1% of the global equity market in the late 1980s.

Fast forward to 2020 and the MSCI Emerging Markets Index now represents c11% of the MSCI All Country World index (ACWI).

Exhibit 1: Emerging Markets Relative Performance vs Global Developed Markets (US$)

Source: Refinitiv

While Emerging markets now make up a sizeable 11% of the global equity market, they account for around 50% of global economic activity (GDP) and contribute 75% of global economic growth. Looking ahead to 2040, it is estimated that emerging economies will have an output that is more than double that of the developed world.

Exhibit 2: Forecast % Share of Global GDP (PPP basis)

Source: PWC World 2050 Report

We believe these growth metrics highlight the growing role that emerging-market allocations will likely play in global and Australian investment portfolios over future years.

We recently increased our recommended allocation within our balanced portfolio to 5% EM equities, this represents c15% of our global equity allocation.

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Wilsons is a financial advisory firm focused on delivering strategic and investment advice for people with ambition – whether they be a private investor, corporate, fund manager or global institution. Its client-first, whole of firm approach allows Wilsons to partner with clients for the long-term and provide the wide range of financial and advisory services they may require throughout their financial future. Wilsons is staff-owned and has offices across Australia.


Disclaimer: This document has been prepared by Wilsons Advisory and Stockbroking Limited (Wilsons) (AFS License 238375, ABN 68 010 529 665). In preparing the information in this document Wilsons did not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Before making any investment decision, you should consider your own investment needs and objectives and should seek financial advice.
In preparing the information in this document Wilsons did not take into consideration the investment objectives, financial situation or particular needs of any particular investor. Before making any investment decision, you should consider your own investment needs and objectives and should seek financial advice. Past performance is not a reliable indicator of future performance.