HOW TO PLAY IT:Canada funds bet emerging markets can lift 'funk'

Mon Feb 25, 2013 3:25pm EST
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* Emerging markets offer higher GDP growth, consumer strength

* Asia and Latam are hot, Eastern Europe and Africa less so

* Consumer goods, infrastructure, debt and equity seen attractive

By Andrea Hopkins

TORONTO, Feb 26 (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.   Continued...