Inflationary pressures, the turmoil in the Middle East and the Japanese earthquake have resulted in a market sell-off that has had a particular impact on emerging markets, says Meera Patel of Hargreaves Lansdown. But the "resulting lower stockmarket levels could present a good entry point for long-term investors".
Last year was the year of the smaller, higher-risk emerging markets, such as Thailand, Peru and Chile. But the best opportunities over the next 12 months lie in the larger companies in the Bric markets of Brazil, Russia, India and China, says Michael Konstantinov, manager of the Allianz RCM Bric Stars fund. In particular, Konstantinov believes Russia will perform well, and the country's 30% weighting in his fund reflects this view. Tensions in the Middle East and a pick-up in US demand means higher energy prices will be around for a while. That's good news for the Russian market, as the country is a significant producer of oil, he says.
Of course, while Russia is attractive, you shouldn't "put all your eggs in one basket", says Darius McDermott of Chelsea Financial Services in The Sunday Telegraph. And that's the strength of investing via a fund such as Konstantinov's, rather than a pure Russian play you get exposure to all the Brics, which should "mitigate against the varying volatility of each country". And, says Patel, "while emerging markets remain a higher-risk area for investment", Brazil, India and China all look like good long-term growth markets too. Konstantinov's fund is "well placed to deliver strong long-term returns".
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Allianz RCM Bric Stars Fund top ten holdings
| Gazprom | 9.1 |
| Petroleo Brasileiro | 6.6 |
| Vale | 4.7 |
| Lukoil | 4.2 |
| Sberbank | 4.0 |
| Infosys | 3.7 |
| Industrial and Commercial Bank of China | 2.7 |
| China Construction Bank | 2.6 |
| Rosneft | 2.5 |
| Reliance Industries | 2.4 |
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