When it comes to adopting a global approach to investing, emerging market stocks can play an important role in a diversified portfolio, in particular one with a long-term time horizon.
The term 'emerging markets' broadly includes places such as Eastern Europe, Asia, South Africa, Russia and Latin America. Most interest centres on the Bric markets - Brazil, Russia, India and China.
Christian Deseglise, product manager for global emerging markets at HSBC Halbis Partners, said growth prospects for emerging markets are much higher than those for developed economies. The opening of many economies to global trade and the influx of foreign direct investment has resulted in stronger companies that are well managed and profitable.
'With a stellar 35 per cent return last year, and backed by continuing improvements in economic fundamentals, emerging markets are set to outpace developed markets in the future,'' he said. 'Compared to global markets over the same period, the performance of emerging markets has been astounding.'
Investors are also reaping the benefits of improved corporate governance and transparency.
Emerging markets represent close to 80 per cent of the world's population, but only half of its output. With their abundant human and natural resources, their ability to contribute more to world growth is significant.