Investors could miss out on attractive returns if they turn their backs on less popular emerging markets, according to Anubha Shrivastava, managing director for Asia, CDC Group.
Investors could miss out on attractive returns if they turn their backs on less popular emerging markets, according to Anubha Shrivastava, managing director for Asia, CDC Group.
Speaking at the annual Emerging Markets Private Equity Forum, Shrivastava argued in favour of less prominent emerging markets.
Sub-Saharan Africa, a focus of CDC’s investments as it works to alleviate poverty by generating economic growth, has key attributes for growth: strong domestic demand, improving governance and a lack of dependence on exports to western countries.
Shrivastava said: ‘Sub-Saharan African economies have benefited from major reforms implemented last year and the perception of risk has improved. While infrastructure issues lead to a higher cost of doing business, sectors such as local banking and telecommunications are in their infancy, and with vast untapped consumer demand across the region there is still strong potential for growth.’
She went on to argue that South East Asia has similar growth potential, although CDC’s investment policy means it can only invest in selected countries in the region, such as Cambodia, Laos and Vietnam.
‘South East Asia has developed and sophisticated capital markets as a result of reforms made in the 80s and early 90s. Its local governments and some private equity managers experienced the severity of the Asian financial crisis of 1997 and, as a result, have extensive experience dealing with downturns. Whereas private equity commitments to the region have not risen as dramatically as in India or China. Private equity investments have been rising as fund managers find interesting opportunities, especially in Malaysia and Singapore. Growth will be driven by its vast middle class, fuelling domestic demand in the region.’
