Emerging market equities show signs of life again - report

Cape Town - Emerging market (EM) equities are showing signs of life again, according to BlackRock Investment Institute's Global Investment Outlook for the second quarter.

"An encouraging sign is a bottoming out of the return on equity in EM markets relative to that of the developed world," it states in the outlook.

"Investors have been slow to shift funds into EM equities, but we believe they are too cautious. Reasons include global reflation accelerating and broadening, solid consumer demand across the EM world and cost discipline boosting earnings in the resource sector."

Recent recessions in Brazil and Russia as well as worries about trade protectionism have kept many investors away. The potential for an unexpectedly strong dollar also looms as a risk.

"Yet, if the worldwide expansion powers ahead and trade keeps recovering as PMIs suggest, we expect EM equities to be among the biggest beneficiaries," said BlackRock.

It sees opportunities in Chinese equities and like EM financials.

"We like EM equities because we see companies improving profitability and benefiting from global reflation," it states.