Tim Scholefield, London-based head of equities at Baring Asset Management, which has US$38 billion (HK$296.4 billion) in assets under management, said the recent decline in the markets was a good thing as it introduced stability but not a sharp correction.

"We see some consolidation here and to some extent [in] equities globally," Scholefield told The Standard in Hong Kong.

"We may see some cooling in sentiment but [it] will not be a sharp correction. It could be only a 5 to 10 percent correction."

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Investors are gaining confidence and their risk appetite has increased, especially in emerging markets, Scholefield said.

There is also positive data coming from the United States, with housing data showing stability and better-than- expected first quarter results, he said.

Risk appetite has returned largely on the back of strong policy responses from governments, Scholefield added.

"Zero interest rates and measures such as increasing money supply also help."

He said emerging markets look relatively well-placed and the signature Baring Global Select Fund favors developing countries.

Latin America and Asia, especially China, and parts of Eastern Europe, are areas that have a "powerful long-term theme," Scholefield said. "The US market will stabilize and corporate earnings could [go] back to record 20 percent growth next year ... but [in] emerging markets [it] will be more than 30 percent."

He noted strong prospects in the materials sector and countries or sectors that are beneficiaries of financial stimulus plans.

Scholefield said energy and gold stocks were a good hedge against the risk of a looser monetary policy governments around the world may implement on a long-term basis to stimulate growth.

However, he said he remains skeptical about the financial sector, with the possible exception of insurance on a firm-by-firm basis, as it remains difficult to raise capital.