There are considerable uncertainties at the moment about the pace of global economic growth and the level of commodity prices over the next several years, but I don't have any special insight into either.

However, I do believe the emerging economies should continue to show positive, if modest, growth despite the impact of a G7 recession on them.

The experience of China at the beginning of this decade will serve as a guide. Countries and companies with open markets, free-floating currencies and sustainable competitive advantages in what they produce will continue to prosper and grow in importance as global investment destinations.

Brazil provides a very positive picture from this perspective and certainly offers better value when considering the risk profile than its fellow commodity giant, Russia.

China retains a sustainable competitive advantage in world markets and a sustained infrastructure-led plan for domestic economic development, which makes it a long-term winner in globalization.

Beyond these countries, my attention is mainly on the companies that will grow and profit from the unchanged secular themes within the emerging markets.

Infrastructure is fundamental to the process of third world urbanization, which will last for decades. China has demonstrated in the last 20 years the benefits from increased potential growth rates that infrastructure investment can bring. Companies that build, operate and use this infrastructure remain an area of focus for us.

Globalization at its most fundamental level means that the aspirations of the majority of the world's population become increasingly similar to those of the richest 20 percent.

This stimulates demand for all the consumer services that remain underdeveloped across the world especially in areas such as mobile telecom, banking, retailing, consumer products and food.

None of these will be changed by the events of recent months although in certain countries the pace of development may slow down.

The key areas of vulnerability for emerging markets in the future will be global investors' risk appetite, corporate governance and commodities.

Global investors' risk appetite is the single most important factor in determining the short-term (three-nine months) direction of the emerging economies. In addition, corporate and sovereign governance will determine the robustness of domestic markets.

Russia, parts of Southeast Asia and Argentina do not seem to be responding positively to the challenge of improving governance in the face of adversity.

Meanwhile, Brazil, Turkey and Mexico appear to be sticking to an open-market and reform-based approach so far.

Commodities are also a very important factor, particularly in certain regions. For example, the Middle East, Nigeria and Central Asia will suffer from lower oil price whilst parts of Asia, notably India, will benefit.

There can be no certainty about the future. However, successful investment is not based on predicting the future but on two fundamental principles we attempt to adhere to:

One is understanding the companies in which you invest. We cannot predict the future but we can understand the factors that will determine the success of a company or country.

The other is valuation. We want to buy companies when they are cheap and try to sell when they are expensive. There is no rule more important than this.

The author is head of investor communications at JF Asset Management.

(HK Edition 11/21/2008 page3)