Advisers back emerging markets for 2010 despite Dubai debt

A third (32%) of IFAs are putting their weight behind emerging markets to outperform next year, despite concerns about Dubai's debt problems.

This is slightly ahead of UK shares which are favoured by 30%, according to research from the Virgin Money Investor Intentions Index.

Year on year, optimism in emerging markets is up from 17% at the end of 2008 to 32% in 2009. Sentiment towards far east shares also rose by 10% on December 2008's scores to 22% now, the research suggests.

IFAs are still advising clients to invest in UK shares, however, with 83% planning to advise clients to invest in the UK over the next three months.

This compares with bonds at 77% as the next most popular sector ahead of emerging markets and european shares at 75%.

Adviser sentiment towards cash has slumped from 19% a year ago to just 6% now, though 58% of IFAs will be advising clients to put money into cash over the next three months.

The move away from UK shares follows a tumultuous year for the FTSE 100. In January the index was at 4561.8 before sinking to 3512.1 in March, then rallying to over 5,200 by the beginning of December.

However, in the three months to November the most popular sector for IFAs was UK shares, with 81% advising clients to put money into the UK stock market ahead of 72% who chose bonds.

European shares were chosen by 67% of advisers with emerging markets preferred by 64% of IFAs.

Virgin Money spokesman Grant Bather says: "Optimism about emerging markets reflects the growing belief economic recovery is underway worldwide while the UK has yet to officially emerge from recession.

"The MSCI Emerging Markets Index has doubled since 2 March although it has suffered in the wake of the Dubai crisis.

"The bigger picture however is confidence is returning to shares after a tough year and that advisers and their clients are now willing to take risks in return for long-term gain.

"Advisers and their clients are no longer fixated on safety at all costs and at a potential cost to themselves."