Long-term investors seeking income for pension portfolios should consider the growth of dividend-paying companies in the emerging market indices, managers have said.
Moreover, the potential for several countries to grow their way out of the various emerging market indices over the next decade and into the developed market indices, presented an opportunity for long-term investors, they added.
Andrew Lister, manager of the £371.3m Aberdeen Emerging Markets Investment Company, and Ross Teverson, head of strategy, emerging markets, for Jupiter Asset Management, said investors should make sure they have exposure to EMs within their portfolios.
Lister said: “The outlook for income from emerging markets is promising, as there are a many companies in a wide spread of different countries and industries that generate cash in a range of currencies and then distribute dividends, offering genuine diversification.
Candidates for reclassification
Both managers said certain countries were ripe for reclassification, such as Poland, China, South Korea and Taiwan over the next 10 years, thanks to the maturity of many companies listed on their stock markets.
Teverson commented: “With GDP per capita in terms of domestic purchasing power parity now close to that of some Western European economies, Poland is a candidate for reclassification.” He said he expected the MSCI would upgrade it by 2030.
According to the International Monetary Fund, Poland’s Projected Real GDP growth for 2021 is 2.7 per cent. This compares with 4.5 per cent for the UK and 3.5 per cent for Germany.