(May 11, 2012) — Confidence in returns from commodities has seen a sharp downturn in the past year and fears emerging markets might be overheating have dominated investors’ decisions, research has shown.
Commodities fell from the asset class thought to be the most likely to outperform last year, voted for by investors responding to a survey conducted by the Economist Intelligence Unit (EIU), to third place this year. In percentage terms, support fell from over a quarter of investors believing commodities would shoot the lights out last year to just 14% this year.
The research body said ‘the notable turnaround’ reflected “lower demand for many raw materials from sluggish developed markets in the Eurozone and elsewhere”.
Emerging market equities – which tied with commodities for the top spot last year – were also toppled as investors turned fearful over their short term prospects. Equities listed in the investors’ specific home country sat at the top of this projected performance table, with 26% of the vote.
These views covered just the next 12 months though, and in the long term, investors are still bullish on emerging markets, the EIU revealed.
However, which emerging markets favoured by investors has changed. Brazil suffered the greatest fall in confidence this year, followed by China and India. These three had been the most popular choices last year; this year, Brazil has fallen behind South East Asia – which saw the largest improvement in investor confidence – and northern neighbour the United States.
Tellingly, some 57% of investors reported feeling concerned that some emerging markets were overheating, but there was still strong potential for growth. Only 10% said they thought these nations were nearing their peak in value.
The research was conducted in January this year, surveying nearly 800 institutional investors in 77 countries and was launched at the Bellwether Europe conference held in London yesterday.