Canada funds bet emerging markets can lift "funk"

Mon Feb 25, 2013 4:50pm EST
 
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By Andrea Hopkins

TORONTO (Reuters) - With only tepid growth expected in North America and Western Europe in 2013, Canadian asset managers say the best opportunity for growth comes from emerging markets, where a burgeoning middle class is hungry for consumer goods and improved infrastructure.

Once viewed as higher risk, emerging economies from China to India and Brazil to Mexico are in the spotlight as investors face the prospect of mediocre returns from both stocks and bonds in the developed world in 2013.

While a slowdown in China in 2012 may have left some fearing a trend, growth across much of Asia and Latin America promises to be several percentage points higher than the 2-to-3 percent growth expected in developed economies, without the risk of Europe's debt crisis or the U.S. budget showdown.

"In the emerging markets you have a consumer that is not going anywhere, and not about to fall asleep. We think this is a story for 2013, 2014, 2015, even beyond this decade. We truly believe the emerging markets are going to get us, the developed world, out of our funk," said Serge Pepin, head of investment strategy at BMO Global Asset Management.

While austerity is the flavor of the decade in Europe and the prospect of higher taxes or spending cuts may cut into America's nascent economic recovery, the growing wealth and appetite of consumers in China, India, South Korea, Indonesia, Chile, Brazil and Mexico promise growth in sectors as broad as consumer goods, technology, gaming, infrastructure and banking.

"The consumer is a big theme for us, consumerism if you will," said Pepin. "You have this hungry consumer who wants the same products that you and I have, and their wealth is increasing and their potential for wealth is increasing. It's an emerging middle class that is hungry."

THREE "SHIFTS"

While all of Canada's big banks and asset managers offer mutual funds designed to leverage growth in emerging markets, Mississauga, Ontario's Excel Funds Management Inc has specialized in the market since its chief executive, Bhim Asdhir, founded the company 15 years ago.   Continued...