New research* from Dragon Capital reveals that one in three (34%) retail investors plan to invest in emerging markets in the next 12 months as they increasingly diversify their holdings.
· One in three UK retail investors plan to invest in emerging markets in the next 12 months on hopes of faster economic growth
Of these, 7% will be first-time investors, 21% will slightly increase their allocation and 6% will dramatically increase their allocation to emerging markets. Just 3% questioned plan to reduce their exposure.
The study, carried out amongst retail investors in the UK, shows 32% of UK retail investors think that growth in emerging and frontier markets will outpace that of developed markets in the next five years.
The top three attractions given by UK investors for investing in emerging and frontier markets are that many have huge benefits to gain from the technological revolution (51%), followed by an acknowledgment of growing stability in these markets (48%), and the belief that many are currently undervalued (44%).
At the moment, one in five (19%) UK investors are currently invested in a fund with exposure to emerging and frontier markets. Of those, the biggest number (39%) found the fund themselves and self-invested, followed by 37% who had the fund recommended to them by their financial or professional adviser or wealth manager.
Dragon Capital’s research shows the most important factor for UK investors when choosing an emerging or frontier market fund was clear and low-cost fees, followed by a strong track record.
Liquidity ranked as the third most important factor followed by a strong focus on corporate governance and ESG and longevity.
Dragon Capital’s investment trust Vietnam Enterprise Investments Limited (VEIL) launched in 1995, is the longest running fund focused on Vietnam and one of the largest investing primarily in listed and pre-IPO companies that offer attractive growth and value metrics, and strong corporate governance.
VEIL seeks long-term capital appreciation through strategic holdings in listed and pre-IPO companies that offer both attractive growth and value metrics, and strong corporate governance. VEIL allows investors to access Vietnam’s leading blue chips, including many companies that have reached their limit for foreign investment.
Its top holdings are diversified across high quality banking, software, industrial park developer and retail stocks which offer stable long-term growth potential, benefitting from the increase in FDI and Vietnam’s own strong domestic growth.
Dien Vu, Portfolio Manager of VEIL said: “Investors have been dramatically increasing their exposure to emerging market equities as falling global inflation and the reopening of China’s economy has helped to reverse the slide in this asset class last year.
“Vietnam is leading from the front, as the only Asian economy to receive a significant upward revision from the IMF, with revised growth forecasts up to 6.7%. This comes after the Vietnamese economy rebounded by an impressive 8% in 2022, the highest in 10 years. UK investors can clearly see many benefits within emerging and frontier markets and it’s encouraging that so many are acting on this to capitalise on future growth potential.”