Contrarian play? Why emerging markets are still a good bet

Luke Graham, special to
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Emerging markets (EM) are still valuable to long-term investors, but they'll have to pick their investments carefully, industry experts have told CNBC.

Emerging markets had a rough time in 2015 and haven't had a good start to 2016. Over one year, the benchmark MSCI Emerging Market Index has fallen by around 23 percent.

But this could indicate a buying opportunity for brave investors. Stewart Richardson, partner at RMG Wealth Management, suggested EM assets would be valuable to long-term investors who can ride out any volatility.

"If you're looking for real long-term value and you are willing to take an awful lot of volatility in the meantime, selected emerging markets are beginning to represent some value," Richardson said.

JPMorgan's 10 investment themes for emerging markets in 2016

However, Richardson warned that investors need to be selective, rather than simply investing in emerging markets as a whole.

"You would need to be looking at the potential growth stories within emerging markets, which may be some technology sectors and so on," he said. "You might want to be more sector and stock specific as opposed to a whole scattergun approach to EM."

Nick Price, portfolio manager for Fidelity International, also believes that being selective is the key to investing in emerging markets.

"The emerging world in 2016 looks set to continue exhibiting the economic divergences of recent years, with those countries prepared to reform their economies looking best placed to achieve success," he said in a research note at the end of 2015.

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According to Price, active management of shares is important in order to choose stocks exposed to structural growth, while avoiding companies which may drag on performance.

He also recommended India as an example of the importance of reforms.

"Both the economy and the household have benefited from the impact of lower price inflation as the prices of fuel and food have fallen," he said. "This has allowed India's central bank to move interest rates lower at exactly the point where the ongoing reform agenda is raising both consumer and business confidence."

Indian residents walk past the Bombay Stock Exchange (BSE) in Mumbai.
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