Bloomberg News

Invest in Emerging Markets as European Growth Slows, UBS Says

October 27, 2011

Oct. 27 (Bloomberg) -- Investors should put money into emerging markets because European countries face years of constrained growth as they enact austerity plans, UBS AG’s Jeffrey Palma said.

Emerging markets are an attractive investment because those countries tend to have stronger balance sheets and greater potential for expansion, while growth is stalling in developed nations facing high debt burdens, said Palma, a Stamford, Connecticut-based global equity strategist at UBS.

“The European markets are cheap compared to the rest of the world and valuations seem supportive, but I think there are better growth opportunities elsewhere,” Palma said in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. “If you look at emerging markets, valuations are quite attractive there.”

Five straight monthly declines drove the MSCI Emerging Market Index’s price-earnings ratio to 9.5 earlier this month, the lowest since December 2008. The Stoxx Europe 600 trades at 11.7 times earnings, near its lowest levels since 2008. Emerging-market sovereign debt will probably amount to 35 percent of gross domestic product this year on average, about one-third the level for developed markets, the International Monetary Fund said in June.

Developing nations are likely to expand 6.4 percent this year, the IMF forecast last month. That compares with a growth rate of 1.6 percent in the developed world.

--Editors: Joanna Ossinger, Jeff Sutherland

To contact the reporter on this story: Kaitlyn Kiernan in New York at kkiernan2@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net


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