Emerging markets are playing an increasingly important role in the global economic system, according to Global Custody Forum keynote speaker Rohinton Mewawala.
Mewawala, who spoke on key trends in emerging markets, revealed that more than half of global economic growth is now driven by markets such as Brazil, China, India, Russia and South Africa.
He suggested that, for investors, these countries have also offered some of the “most spectacular” returns over the long-term.
According to statistics presented by Mewawala, China’s new normal growth rate is "significantly lower" than those recorded in the past two decades, while India has the highest gross domestic product growth rate projection.
However, Brazil is suffering from stagflation and negative growth rates, while Russian economic plans to revive growth have been affected by a steep fall in oil prices and economic sanctions.
Finally, the presentation showed that South Africa is currently on the brink of recession and is also battling stagflation.
Mewawala explained that all emerging markets are currently facing challenges, such as a significant funding gap, limited choice, expensive capital, lack of avenues to deploy domestic savings, poor pricing efficiency, currency issues and lack of diversification.
However, emerging markets can also take advantages of opportunities including the development of liquid government debt securities market, a development of a broader investment base, an increase in issuer participation, a path for sustainable integration into global markets, tax incentives and empowering regulatory institutions.
Mewawala suggested that India will be the “most profitable destination for custodians for another five to 10 years”, while other emerging markets will “bounce back”.
He said: “India is growing, and returns are going to be higher than 20 percent.”
Image: Shutterstock 