Dan Tubbs, co-manager of the BlackRock Emerging Markets Fund, believes investors should look beyond the familiar attractions of Brazil, Russia, India and China (the BRICs) and exploit the advantages of lesser known emerging markets such as Saudi Arabia, Qatar and South Korea. Many of these enjoy the same or better growth characteristics as the BRICs, but with more attractive valuations.

The long-term advantages of emerging markets are undeniable. Economic growth outstrips the developed economies; Peru’s 7% average GDP per annum growth since 2005 or Indonesia’s 5.5% compares to 1.1% in the US, 0.8% in the UK and only 0.05% in Japan over the same period. Emerging stock markets have similarly outperformed. Over these same five years Egypt has returned 230% and Korea 110%, while the US, UK and Japan returned between 8% and 11%.

The significance of emerging markets in the global economy is at last being recognised. 86%3 of the world’s population lives in emerging countries. The number of people of working age is set to grow rapidly over the next 30 years helping to drive stronger domestic consumption. By contrast, the working age population in the developed world is expected to fall, leading to added pressure on already stretched public budgets and pension systems.

Although GEM represents 35% of the world’s gross domestic product, it accounts for a disproportionately low 13% of the world stock market capitalisation.

Dan Tubbs, co-manager of the BlackRock Emerging Markets Fund commented: “While the BRIC markets are important, there are 18 other emerging markets and a further 25 frontier markets which have enjoyed less investor attention to date. Many of these countries have as good, if not better, growth characteristics than the BRIC economies. Two key structural drivers we are seeing within emerging markets are the favourable shift in demographics and the rapid growth in domestic consumption, highlighted by the growth in sales of motor vehicles which are 35% above where they were at the start of 20085. In the developed world motor sales are still well below their 2008 level.

“Saudi Arabia is an undiscovered opportunity for investors. It benefits from a young and fast growing population driving domestic consumption as well as a huge government infrastructure spending programme. However foreign investors still only make up just half a percent of the Saudi stock market’s turnover.

“South Korea has a powerful domestic economy which grew 7.8%6 year on year in the first three months of the year. Its world-class companies, such as Hyundai Motors and Samsung Electronics, are benefiting from strong exports and are gaining global market share.

“Qatar is one the of world’s fastest growing economies with stronger annual GDP growth than China and is a leading liquefied natural gas producer. It has a population of less than one million, yet possesses 14%7 of the world’s gas reserves.

“The BlackRock Emerging Markets Fund is unrestricted geographically, enabling us to identify and invest in countries and companies that offer investors exposure to strong growth, both within the BRIC economies and beyond.”