Markets in the developing world have staged a comeback this year after stocks fell nearly 20% last year. But simply overweighting emerging markets is not necessarily the best reaction.
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Advisors should focus on local emerging-markets stocks that rely on consumers, said Jason White, a portfolio specialist at T. Rowe Price Associates Inc.
That’s because savings rates in emerging markets average 30% and wages are growing by about 15% a year, White told InvestmentNews. Multinational corporations that depend on emerging-market consumers for much of their revenue also offer promise, he said.
Growth in emerging-market nations should accelerate in the second half of 2012 as developing nations take more action this year to spur their economies, he added.
Debt among emerging-market nations and companies is another area that advisors should focus on, said Chris Dillon, fixed-income portfolio specialist at T. Rowe Price.
Dillon predicts local emerging-market debt funds to yield about 6.5% this year, with further help from a falling dollar.