Emerging markets still a good long-term bet

Although emerging markets are in a slump right now, their economies are robust, says David Stonehouse, Acuity Investment’s director of fixed income.

“You have reasonable debt levels, normal types of inflation and [they’re] not in a deflationary-scare type of environment, which is what the developed world’s central banks face,” Stonehouse explains.

“[Emerging markets’ central banks] may be relative neophytes but the policy prescriptions are tried-and-true, so they have a huge advantage over the developed market.”

Read: Identifying emerging markets opportunities

Last week, Stonehouse met with AGF Investments vice president Thiery Jannini and AGF senior vice-president Robert Lyon to discuss their economic expectations at AGF’s 2013 Mid-Year Market Outlook Webcast.

Jannini also notes investors need to examine emerging markets on both a structural and cyclical basis. Cyclically, export-oriented nations are suffering thanks to China’s slowdown and austerity measures in Europe.

But “on the structural side, emerging markets still have all the positives we’ve been talking about for the last few years,” says Jannini, such as strong demographics, opportunity for rapid GDP growth and harnessing of untapped resources.

Read: New sectors will drive Asia’s growth

The shifting outcomes of emerging and developed markets also affect the oil industry, explains Lyon. “Over the past 10 years, virtually all the growth in demand has come from emerging markets. As the U.S. has recovered, oil demand is [still] pretty flat,” he says.

Regarding the supply side: “There’s a debate whether the U.S. gets fully self-sufficient in oil. We don’t think so but certainly they’re increasing oil production and importing less oil. That oil has to be absorbed elsewhere in the world so there’s going to be an impact.”

Also read: U.S. “green team” threatens Canadian energy