Emerging markets: no longer a niche as Asian consumers 'buy local'

Asian consumers are increasingly buying local brands, a trend that affects the way investors allocate their money between the UK and emerging markets, says Jan de Bruijn, head of Asian equities at Gartmore.

Changing times

Investors who have become accustomed to taking exposure to Asia through domestic stocks should re-evaluate their strategy, according to Gartmore's new head of Asian equities Jan de Bruijn.

De Bruijn, who runs the Gartmore Pacific Opportunities fund, concedes it made sense in the past to buy well known UK stocks with emerging market presence to gain exposure to Asia.

However, he argues over the last few years the new-found confidence has propelled Asian companies to new heights and cautions that the asset allocation ought to reflect this.

He said: 'Asia in the past has been seen as a high risk region and that was probably fair. However, the risk profiles have changed. Asia has gone from high risk and high volatility - though not necessarily high returns region - where you allocate two to three per cent to a situation where the risk, if you look at volatility, is very similar [to Western equities].

Growing confidence in Asia

In addition to the perceived shift in power from the West to the East, de Bruijn argues the ambition and modus operandi of many Asian companies has also changed, which ought to influence the thinking on asset allocation. In other words, these companies are no longer looking to the US and Europe for guidance.

He said: 'Instead of them coming to the West and competing with the West, they are now building their own brands. They are investing in their own research and development, improving production and they are teaching us instead.

'It's a dangerous argument to say you should buy Luis Vuitton because it's going to be hard for Asian companies to compete. Actually, Asian companies are very competitive.'

Moreover, de Bruijn points out that Chinese high-end consumers, for instance, are willing to buy their own brands rather than exclusively searching for Western ones. 'These guys are getting very comfortable earnings and the income that they have means that they have become comfortable with themselves and their tastes.'

'They are developing their own consumer brands and they are entering our market now. There are a lot of unfound gems waiting to be discovered.'