SG Securities is urging clients to overweight those Asian and Latin American markets where investors appear not to have factored in expectations of a pick-up in growth next year. Head of global emerging markets strategy Tim Love said that assuming the Japanese yen did not sink to 140 to the US dollar, and the widely watched JP Morgan Emerging Market Bond Index continued contracting to reach around 650 basis points over United States treasuries by the end of next year, Asian and Latin American markets should benefit. 'We will have a further contraction in bond yields and currencies finding their natural value,' Mr Love said. He said those countries in particular that enjoyed strong macroeconomic fundamentals, such as a current account surplus, would be best-placed to benefit from a rise in the value of markets. SG recommended a heavily underweight position in South America and a neutral position in the Mediterranean countries, Europe, the Middle East and Africa. An exception is Poland, where a recent upgrade from Fitch IBCA has praised its economic policies. Poland's fiscal deficit is expected to be less than 3 per cent of gross domestic product this year, with the country seeing increasing capital flows. Mr Love said his expectation that bond yields in Asia and Latin America would narrow further should allow more borrowers to access capital markets. There is already evidence of increased liquidity in US municipal bond and the high yield market in the US, and the mainland has recently launched an expected awaited US$500 million global debt offering, which would further fuel confidence in Asian markets. SG said the expected mainland bond 'will be even more meaningful if the spread over treasuries is 250, not 300 basis points over [treasuries]'. It said liquidity should also increase into selected emerging markets from US funds that invested in Europe, Australia and the Far East, and opportunistic buying had already been seen in Mexico and South Korean markets. It said that to take advantage of the expectation of increased liquidity, it had increased its exposure to telecommunications, bank and technology sectors. In contrast, it was neutral or underweight mining, construction, consumer and steel stocks. Within Asia, SG said it had most recently turned overweight in India, on a bottom-up stock-selection basis, favouring technology and multinationals. It was also overweight mainland stocks, including Hong Kong, South Korea and Thailand.