The East powers ahead while America stumbles

Ian Cowie asks whether high-growth economies such as China’s are a safer bet than those of the debt-laden West

Emerging markets have been the most profitable game in town for several years now, even after the setbacks some suffered toward the end of 2007. True, the bears enjoyed a bit of a picnic when China funds — easily the biggest single country segment of the emerging markets sector — fell by about a fifth of their value in January. Now the big question for investors is whether the bull is dead or merely pausing for breath.

Wiseacres have been calling the top of these markets all the way up, but relative returns since 2003 have called into question conventional assumptions about risk. While developed countries’ stock markets have been hit hard by the credit crunch, emerging economies have powered ahead. Consumer debt is a major worry in America and Britain but scarcely an issue in Brazil, Russia, India or China.