According to the Barings Investment Barometer, a new survey conducted by Baring Asset Management, emerging markets and Asia (excluding Japan) come joint top in the ranking of financial advisers’ most favoured asset classes, with 88% favourable towards each of these regions for investment. Of these, 42% are very favourable towards investing in emerging markets and 39% are very favourable towards Asia (ex Japan).

The Barometer shows that two-thirds (66%) believe that their clients should increase exposure to emerging markets with a quarter saying their allocation should stay the same and only 9% saying it should reduce. Over half (55%) believe that their clients should increase exposure to Asia, second to emerging markets.

Ian Pascal, Head of Marketing and Communications at Barings, comments: “Our fund managers believe we are near the optimum point in the economic cycle for emerging market equity investing, so it is good to see that financial advisers are tuned into this and believe their clients should be increasing their exposure. The recovery in the global economy, aided by a rebound in the US, coupled with continued low interest rates in developed markets is driving earnings estimates in emerging markets. Furthermore the asset class is attractively valued.

Pascal continues, “Asian equities are also highly favoured as the economies in the region are booming from increased consumer spending. Over time, consumer spending is set to increase as wages rise, particularly in China.”

There is however, concern among financial advisers about current market volatility, with almost half (48%) encouraging greater diversification of assets to mitigate risk and a quarter advising investment in multi-asset products. Nearly half (49%) believe the Euro Zone debt crisis is one of the biggest global macro-economic challenges to investment growth in the next six months, with the same portion citing over leveraged economies’ ability to reduce debt as a major threat. Fears of a double dip recession are not so pronounced, with 27% concerned about it.

According to the Barometer, the asset class that financial advisers are most familiar with is, unsurprisingly, UK equities (92%) while 89% are familiar with emerging markets.

Favourability towards offshore investments amongst respondents was split exactly into two halves with 50% of financial advisers claiming to be favourable to offshore investments and the other 50% stating they were unfavourable to the same asset class.

Pascal comments: “The split opinion on offshore investments is very interesting. Whilst a great deal of progress has been made recently with offshore-domiciled funds now included in the IMA sectors, more can be done to increase availability platforms. We hope that as a consequence of their increased visibility, intermediaries will increasingly consider the many opportunities offshore-domiciled funds offer.”