Emerging Markets Still Offer Best Long-Term Value, Pictet Says

(Bloomberg) -- Emerging markets still offer the best value among asset classes with returns forecast at 10 percent annually for the next five years, according to Pictet Asset Management Ltd.

The fund management arm of the Swiss group that oversees 509 billion Swiss franc ($512 billion) said investors will be forced to reassess their emerging-market exposure, however. A a default portfolio split evenly between equities and bonds will post a 0.5 percent loss in the same period.

“Emerging assets will have to become a bigger part of the investment mix,” according to a Pictet report distributed to reporters in London. “Emerging markets will be a brighter spot for equities, with a particularly strong showing expected from Asia.”

Developing-ntion economies will grow at an average of 4.6 percent in the next five years as companies embrace new technologies, Pictet predicts. That compares with forecast expansion of 1.6 percent for advanced economies as the era of loose monetary policy draws to an end and corporate profit margins peak, making U.S. stocks look “particularly unappealing.”

Pictet expects emerging technology stocks to deliver the best equity returns, more than double those of their U.S. counterparts, at 14.5 percent.

Local-currency bonds from emerging markets will top fixed-income returns with an annualized 5.8 percent over the next five years, underpinned by currencies that are forecast to appreciate 1.3 percent per year and inflation remaining contained, Pictet said.

©2018 Bloomberg L.P.