Emerging markets offer good buying opportunities for long-term investors as economies globally improve, Robert Kapito, co-founder and president of BlackRock Inc., said.
There is too much short-termism in investing and foreign investors should be diversified in order to survive this period of market volatility, Kapito, who oversees the world’s largest asset manager with $3.9 trillion in assets, said in an interview with Bloomberg Television’s Susan Li Monday.
Investors have pulled out money from emerging markets amid speculation that the U.S. Federal Reserve will start to curtail easing policies as soon as this month, marking an end to cheap money inflows that had propped up asset prices from India to China and Indonesia.
“The emerging markets are going to account for about 60 to 65 percent of the world’s growth over the next 20 years,” said Kapito. “If you are investing for the long term, this is a good opportunity to get reinvested into the emerging markets.”
Fed Chairman Ben S. Bernanke told Congress on May 22 that the central bank could scale back the pace of its $85 billion of mortgage bond and Treasuries purchases if the U.S. economy showed sustained improvement.
Exchange data show foreign institutions pulled $8.4 billion from Indonesian, Korean and Thai stocks this year amid signs of slowing regional economic growth. The MSCI Southeast Asia Index has dropped about 17 percent from the May peak this year.
Investors have also taken $22.1 billion out of emerging- market bond funds since the end of April, almost five times the withdrawal from U.S. corporate credit, according to data provider EPFR Global.
That reversed the trend that saw $58.8 billion pour into funds that buy emerging market debt last year, chasing yield amid a U.S. stimulus program that’s funneled more than $2.6 trillion into the financial system since September 2008.
The worst outflow from emerging markets has yet to be seen, Jeffrey Rosenberg, chief investment strategist in fixed-income at New York-based BlackRock said in a telephone interview with Bloomberg News this month. Losses for emerging markets debt have the potential to accelerate, he said, adding the rout may eventually present a buying opportunity.
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