Stocks in the global emerging markets have so far this year been developing more weakly than in industrialised countries. This is the first time this has happened since 2001. There may be several reasons for this. In my opinion, one of the most important of these is the flight to what are perceived as the “safe” markets in the west. So far this year, the flow of money out of the funds managing equities in global emerging markets has amounted to almost USD 50 billion. This corresponds to 40 percent of the combined net subscriptions in these funds in the period between 2003 and 2007.

So, are growth prospects in the global emerging markets equally as weak as those in developed countries or is the stock market’s perception of ”safety” wrong?

Weak growth prospects in developed countries may, amongst other things, be attributed to high consumption relative to earnings, which has led to high levels of debt. The savings rate will therefore have to increase going forward in order for indebted consumers to pay off their loans. Governments now have to inject capital into banks that have given credit to consumers who were not in a position to service them. This was all well and good as long as property prices continued to rise.

As we know, rising property prices allowed US consumers to refinance their mortgages and take out equity capital for consumption. Up until 2007, this was an important driver of continued high GDP growth in the US economy. Then when property prices began to point south, the consumer party came to an abrupt end.

The fact that the party is over in the west will, naturally enough in an integrated and open world, also influence growth in the emerging markets. Producers of goods that are mainly sold to consumers in developed countries are especially affected. We have already seen a significant number of bankruptcies amongst smaller export-driven companies, in China and elsewhere, which has led to a not insignificant level of unemployment in several production-oriented towns and communities.

The biggest difference between future prospects in developed countries and those in emerging market countries is the debt level. The level of corporate, consumer and public debt is much lower in the emerging markets. In fact, China alone is sitting on 20 percent of the global currency reserves. This is more than the US and the Eurozone put together. If you look at the debt level of households, this is only 15 percent of GDP in the emerging markets, while the corresponding figure is 60 percent in the developed world. In the US and the UK, the debt ratio constitutes 100 percent of GDP. Companies’ balance sheets in the emerging markets are also clearly stronger than in developed countries. The banking sector in the global emerging markets has therefore also to a large extent been spared the significant losses we have seen in Europe and the US.

Low indebtedness means that the tool box of the most important countries in the global emerging markets is considerably better equipped than in developed countries. The USD 568 billion stimulus package announced by China this weekend is expected to contribute to GDP growth of 2-3 percentage points. And Chinese authorities can actually afford this. In the first instance, the package goes to stimulate investments in infrastructure, which again may form the basis for economic growth by means of further industrialisation. With regard to the export industry in China, this is in the process of switching from producing cheap consumer goods to products with a higher refinement ratio and a greater element of intellectual capital.

A good example of this is that Chinese equipment suppliers within the telecommunications sector are now very competitive relative to western producers. Not just in terms of prices, but also with regard to technology and service levels. Despite reduced demand in developed countries, exports from China actually increased by 19 percent in October. Not so bad for a country that many believe only sells cheap consumer goods to the US. With consumption growth of 23 percent in October, the Chinese have not gone into hibernation either.

Expected growth in the global emerging markets has been moderated over the past few months, but has not fallen off the charts like in numerous developed countries. Leading macroeconomists now expect GDP growth for emerging market countries to be about four percent overall in 2009. For the Asian countries, such as Japan, growth is estimated at six percent.

From having been traded at a premium of over 10 percent as recently as this spring, companies in the emerging markets are now priced at a 25-30 percent discount relative to companies in the developed world (current earnings – P/E). The emerging markets are in fact now priced at lower levels than during the Asia crisis at the end of the 1990s. This should vouch for good opportunities for investors with a time horizon longer than the end of next week.

Going forward, the stock markets in the global emerging markets will certainly be affected by negative growth impulses from countries that must go through a painful period paying off the good old days. In the long run, however, I am certain that sustained economic growth in many of these countries will be reflected in the estimation of their value.