x Abu Dhabi, UAEFriday 19 January 2018

Emerging markets 'to become less volatile'

JP Morgan strategist predicts a weak but sustainable recovery in countries such as the UAE.

The world is at the beginning of a new economic cycle that could lead to stronger international markets and subdued volatility in emerging markets such as the UAE's, JPMorgan Asset Management's global strategist said yesterday. "It will be a weak recovery," Tom Elliott said in Dubai. "Consumers are paying off debt, governments are paying off debt. It will be weak, but we don't think it will be a double-dip. We do think it is sustainable."

The recovery held out special promise for emerging markets such as the UAE's, he said, adding that he expected them to continue to be a target for long-term international investors in coming years. And as wary investors piled back into stocks during the economic recovery, he said these markets were poised to attract new capital, increasing liquidity and reducing volatility. "As emerging markets become more liquid, they are more representative of the overall economy," he said. "You will find they will become less volatile. We have come a long way from 20 years ago, when if you sold a block Asian stock it lowered the share price by 5 per cent."

Mr Elliott said he also expected emerging markets to move away from a concentration in a few closely held stocks to a broader range of equities and a more diverse group of shareholders. "In some emerging markets you find the main stocks are one big telecoms company, one oil company and one cement company which are interlinked and owned by five families," he said. "We're increasingly moving away from that, and they are becoming more like western markets.

"We know full well that the market has to broaden out and be more than real estate and real estate services." afitch@thenational.ae