Canadian investors bullish on emerging markets
Canadians believe the emerging markets—in particular Asian nations such as China and India —represent the best investment opportunities, according to Franklin Templeton Investments Corp.'s latest national research.
A significant proportion of Canadians (38 percent) think emerging markets represent the greatest investment opportunity over the next decade. Canada placed second (25 percent) followed by developed international markets such as the United Kingdom, Germany and Japan (six percent). The United States was chosen by only three percent of respondents.
Within the emerging markets, 45 percent of Canadians who currently have investments picked Asia (including East Asia, South and South East Asia) as the region showing the greatest promise. Twenty-nine percent picked East Asia, a region that includes China, while 16 percent chose South and South East Asia, a region that includes India, Indonesia, the Philippines and Thailand. Nine percent of investors believe Latin America is the most promising of the emerging markets followed lastly by five percent of investors that picked the Middle East-North Africa region.
The survey of 2,009 Canadians was conducted on June 22 and 23 by Angus Reid Forum.
"Franklin Templeton's research indicates Canadian investors are keenly aware of the promise and prosperity of the emerging market economies," said Don Reed, president and chief executive officer of Franklin Templeton Investments Corp. "These fast-growing economies are expected to drive global stock market returns in the years to come."
Unfortunately, few Canadians are taking full advantage of the emerging markets opportunity within their investment portfolios. As of June 30, about $8-billion was invested in emerging market equity funds in Canada. In comparison, more than $199-billion was invested in Canadian equity funds, reports research firm Morningstar Inc.
Dollars invested in emerging market equities account for only 2.3 percent of the value of equity funds owned by Canadians, reports the Investment Funds Institute of Canada. In comparison, emerging market equities account for 9.6 percent of all equities held by the forward-looking Canada Pension Plan Investment Board, more than four times as much as Canadian retail investors.
Research indicates this asset mix discrepancy may soon change. The survey found investors who intend to increase their exposure to emerging markets over the next 12 months (33 percent) outnumber investors who intend to decrease their exposure (eight percent) by more than four to one.
Knowledge may be the key to increasing investment in new international markets. When investors were asked what would make them more likely to invest in the emerging markets, 40 percent replied "getting more education about global investment opportunities" closely followed by 37 percent of investors who said "understanding investment options that reduce my risk."
"Canadian investors need expert advice when it comes to investing in the emerging markets," said Mr. Reed. "That's one reason Franklin Templeton draws on our on-the-ground local expertise in 34 countries around the world. These days, investors expect their funds to be local everywhere."