Emerging market equities will be an attractive asset class for investors in 2012, according to BNY Mellon.

The asset management firm believes that the sell-off in emerging markets due to their poor 2011 performance has created some compelling valuations.

‘We believe the 2011 correction has created a far more compelling valuation opportunity within the asset class than we saw heading into 2011,’ said Kirk Henry, senior managing director and senior portfolio manager for The Boston Company, BNY Mellon’s value equity specialist.

Commodities are also seen as an attractive option for investors as their low correlation with stock and bonds make them a good asset class for diversification.

Kenton K. Yee, senior research analyst for Mellon Capital, commented, ‘With continuing volatility, we think commodities such as agricultural, soft commodities, livestock and precious metals offer good diversification with assets that have a low correlation with stocks and bonds.

‘However, we would exclude energy and industrial metals, as the expansion of Chinese industry and construction has strengthened the correlation between corporate profits and energy and industrial metals prices. These commodities appear to have become pro-cyclical like growth stocks.’

In BNY Mellon’s forecast for the coming year, James Harries, investment manager of global funds at Newton Investment Management, also claimed that the best opportunities were to be found in ‘high-quality, dividend-paying equities and the corporate debt market.’

Pareto Investment Management, another branch of BNY Mellon, also pronounced 2012 ‘the year of the dollar’.

Constantine Ponticos, managing director, investment research, at Pareto, explained, ‘The spectrum of possible outcomes to the European crisis remains very broad and the investment implications at each point may be very different.

‘If there is an expected major development in the eurozone, there will be an almighty scramble for U.S. dollars.’