Widen your horizons and reap the rewards

India. Mexico’s GDP growth is projected at 1.7 per cent, while growth in Argentina is forecast at 2.7 per cent.

Overall, gross domestic product growth in emerging markets this year is predicted at 4.5 per cent, versus 1.9 per cent for developed countries.

Some would argue – why take on more risk at this phase of a mature bull market? Especially as navigating emerging markets is notoriously hazardous.

Mark Mobius, executive chairman at Templeton Emerging Markets Group, noted: “Emerging market stocks have been in a funk since 2013.

“They recovered in 2016 only to be smacked back down after Donald Trump’s election victory. Their currencies sold off sharply. Trump’s proposal to tariff imports from China and Mexico, which are among the US’s top trading partners, ignited fears of a trade war. Chinese stocks continued plunging in the New Year on worries Beijing is letting the yuan depreciate too fast against the dollar.

“But emerging market stocks can make for a good contrarian investment owing to superior earnings projections, low valuations and the potential for mean reversion after years of underperformance.”

Kate Marshall, investment analyst at Hargreaves Lansdown, noted: “It has been a tale of two halves for emerging markets investors over the past couple of years. In 2015 sentiment towards these markets was remarkably low, amid fears over slowing growth in China and political unrest in the Middle East. Falling demand for commodities also proved painful for resource-rich economies such as Brazil.

“2016 saw a reversal in fortunes as concerns over China subsided and commodity prices recovered. The prospect of political and economic reform in some countries also improved investor sentiment and stock markets rebounded.

“We feel Asian and emerging markets offer excellent opportunities for long-term patient investors. As emerging economies mature they have the potential to build some of the world’s most successful companies and overtake Western counterparts.

“In the late 1970s, developed economies contributed 82 per cent of global growth and 86 per cent of global consumption.

“Yet from 2010-15 the respective figures were just 30 per cent and 28 per cent which highlights the growing importance of emerging countries on a global stage.”

However, she wisely added: “It should not be forgotten they are a higher-risk and more volatile investment proposition.”

Take South Africa for one, where post-Mandela political turmoil is threatening to send the country on the same path as basket case and neighbour Zimbabwe.

Turkey too is going through challenging times.

Brazil has been enmeshed in corruption scandals.

You fly by the seat of your pants when investing in emerging markets. Nasty surprises are often round the corner.

Emerging markets are not for the faint hearted but a degree of exposure here in a balanced, diversified portfolio with a long term view may reap rewards. Trevor Law is managing director of Merito Financial Services, chartered financial planners,

based in Solihull. Email:tilaw@meritofs.com