The fundamental case for emerging markets investment remains sound. The two decades since these countries first made forays into the capital markets are only a short period in world economic development and a fleeting moment in history. Yet during this period emerging markets have come a long way in establishing sound fiscal and monetary policies, restructuring their economies, addressing corporate governance, and improving their economic fundamentals. Keeping this in mind, the potential for continued rapid, positive change in these economies and markets is still very strong.

Long-term fundamental positives for the emerging markets include:

– Large, rapidly industrializing populations

– Undervalued currencies

– Declining current account deficits

– Improving infrastructures

– Competitive wages

– Increased competition, reform and restructuring

– High savings rates

– Long-term propensity toward growth

Of course, emerging markets vary a great deal in their political realities, their cultural and national identities, and their legal and economic institutions. Many emerging market populations are still in poverty and lack the basic means for development. Great attention needs to be paid to understanding the multifaceted nature of these countries. In short, investment in these markets remains challenging. However, we believe that with use of a wide array of information and skilled application of disciplined analytical tools, it is possible to avoid troubled areas and selectively invest in high-return countries and companies.