Emerging markets may have fallen about 15% since the July peak, but they are bound to bounce back stronger than ever, F&C predicts.
Sam Mahtani, F&C’s Global Emerging Markets Portfolio manager, says confidence will return on the back of increased domestic demand.
He says F&C are looking at economies with strong internal growth dynamics – such as Korea, Brazil, India, Thailand and Egypt.
“Although each of these countries is at a different point in the economic cycle, they all share a common trait, namely their growing independence from the US economy as domestic demand continues to increase,” Mahtani says.
Korea is showing recovery signs after years of household debt, Mahtani says, with business and government increasing spending.
“Holding companies GS Holdings and LG Corp have both made moves towards restructuring their business models to improve efficiency and shareholder value," he says.
In India, Mahtani says the government will increase energy expenditure to boost living standards.
“India's growing and increasingly affluent population is boosting demand for power and one of our favourite companies BHEL, which builds power plants, should benefit," he says.
Brazil is another with a growing energy demand.
“Tractabel Energia is a very well managed company with a robust franchise - Suez is a majority stakeholder,” Mahtani says.
“In Brazil like elsewhere the main economic driver is the pick-up in consumer demand, which has been given an additional push by interest rate cuts."
While in Thailand, Mahtani says the stabilising political situation will boost investment; while Egypt is riding high on the back of oil and tourism.
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