The East powers ahead while America stumbles
Ian Cowie asks whether high-growth economies such as China’s are a safer bet than those of the debt-laden West
Perhaps at this point I should declare an interest. I invested in Gartmore China several years ago — before Awdry took the reins, indeed back when Philip Ehrmann was managing it — and, even after recent setbacks, I have nearly doubled my money. The same is true of a longer-standing shareholding in Pictet East European investment trust. During August 2007, the last time markets took fright and many investors convinced themselves the world was coming to an end, I also picked up some shares in JP Morgan’s Indian trust for my self-invested personal pension. They cost 328p then and have been as high as 500p since, before falling back to 427p as I write this. Not bad for six months in a bear market. Considering the battering my supposedly ‘safe’ shares in Britain’s high-street banks have suffered recently, these emerging economies’ performance has demonstrated that there are risks in being out of markets as well as in them.
On a longer view, however, it is cautionary to remember that most emerging economies have been here before. Yellowing busted bonds from Tsarist Russia and Imperial China, which still adorn the walls of some old-fashioned stockbrokers, serve as a memento of that unhappy fact. Can globalisation and the internet really mean it will be different this time? Or will events demonstrate the truth of Christopher Fildes’s observation on these markets? About 20 years ago, as a cub reporter, I found myself writing about busted Russian bonds and Christopher — even then the sage of the Daily Telegraph City office — told me: ‘An emerging market can be defined as a market from which it is difficult to emerge.’ That implicit warning may prove more relevant now than it did then.
Ian Cowie is personal finance editor of the Daily Telegraph.
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