Eastern Europe, Middle East and Africa (EEMEA) companies have experienced something of a recovery ov...
Eastern Europe, Middle East and Africa (EEMEA) companies have experienced something of a recovery over the past couple of months, according to Giles Neville, fund manager of Schroders' Global Emerging Markets fund.
He says: 'EEMEA posted 10% growth in April in sterling terms while Latin America has grown 5% and Asia has been flat.'
According to Neville, South Africa has been one of the primary beneficiaries of the good earnings in commodities over the past year.
He points to the oil company Sasol and the platinum mining company Amplats as being in strong positions within the market there. The strong returns over the past three months have taken South Africa to the top of the EEMEA relative performance tables over the 12 months to end of April 2001.
The Turkey national industrial index has fallen 31.05% in local currency terms over the past year. The Budapest stock exchange is down 20.42% in sterling terms, while the Moscow general index has returned -1.38% in sterling terms over the same time period.
The Johannesbourg All-Share rose by 22.73% in sterling terms over the same 12-month period.
Within the EEMEA grouping certain countries are better positioned to withstand the weak global economy. Neville sees Turkey as being in a good position after the recent IMF package, which he argues has helped it recover following an earlier downturn.
But Wike Groenenberg at Schroder Salomon Smith Barney, says that investors may be better off looking elsewhere.
He says: 'In the context of continued fluidity in Turkey, investors in emerging markets should adopt a defensive posture, favouring countries with stronger domestic fundamentals and better liquidity conditions. Some of the countries in the European emerging market timezone might therefore be interesting.'
Neville also sees potential in these European markets, with Poland and Hungary offering opportunities.
Low interest rates allow financials to perform well in these regions, according to Neville.
'Hungary's OTP bank is favourably valued, has a healthy balance sheet and good quality management,' he says.
However, he adds a lack of good quality financials has prevented Schroders' Global Emerging Markets fund from being overweight in the sector.
Groenenberg also sees Hungary as being a relatively strong performer in the Eastern European region. He says the country is expected to record a strong growth rate of 4.9% in 2001.There is continuing strong performance in exports and an acceleration in domestic demand.
He sees potential for inflation to drop from a relatively high 10% to 7.5% because of higher productivity and tighter monetary policies from the government.
Conversely, the economic horizon does not look so bright for Poland with Groenenberg predicting a drop in growth from 4.1% in 2000 to 3.3% this year.
EEMEA has staged a recent recovery.
Commodities are performing strongly.
Low interest rates boost financials.
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