“Bank of America Merrill Lynch said investors should buy emerging market bonds and equities as the so-called BRIC nations of Brazil, Russia, India and China post the biggest improvement in growth this year.
“What we’re saying about emerging markets is that the BRICs are back,” David Hauner, head of fixed-income strategy for emerging Europe, the Middle East and Africa, told reporters in Abu Dhabi yesterday. “Last year a lot of people were saying that the BRICs are finished and of course we had disappointing growth in all of them. Now this year we see a recovery.”
Emerging markets are expected to record economic growth of 5.2 percent this year compared with 4.9 percent last year. The best growth will come from the BRICs as concern over China’s political transition, Indian currency weakness, and currency appreciation in Brazil wane, Hauner said. The best fixed-income opportunities this year will be in Asia because of its superior growth and links to the U.S. dollar, he said.
“People are getting out of bonds and buying more emerging markets, more high yield but they are selling some Treasuries, we think this makes a lot of sense,” Hauner said. “Our own global asset allocation suggests that you should be overweight equities, overweight emerging market bonds, should be overweight high yield.”
