There is no doubt emerging markets have dominated investor ideas over the past few years, but while China and India command the chatter, is it wise to also look outside booming Asia for opportunities?
Investec Asset Management strategist Max King certainly thinks so, predicting the positive recent trends to continue.
“The combination of attractive valuations, strong earnings growth, better quality of corporate management and a structural improvement in economic fundamentals means that emerging markets have been the place to invest in recent years,” King says.
“Despite inevitable setbacks, this looks very unlikely to change, and the trend is broadening with frontier markets, such as Africa, receiving increasing attention.”
King is also advising investors to take a hard look at Russia, despite the current scepticism.
“The strong performance of the Russian market means that it is hardly a contrarian idea, but democratic Russia comes in for increasing criticism and suspicion from Western media and politicians while authoritarian China is regarded with adulation,” he says.
“The Chinese market has seen extraordinary gains in the last two years, but Russia now looks the most attractive of the BRIC markets.”
Neptune CIO Robin Geffen agrees, highlighting some of the attractive figures coming from behind the former Iron Curtain.
“Year-to-date the Russian market has underperformed other emerging markets such as China, because there has been little government spending. The outlook is improving and recent economic statistics have been supportive,” he says.
“GDP for the first half of the year came in at 7.1% – a full 1% ahead of expectations… inflation has been coming down and wages have been rising at 20% per year for the past three years.
“We expect the government to announce investment of $80bn in the final quarter of 2007 from the Infrastructure fund.”
Santander Asset Management’s Madrid-based fund manger Consuelo Blanco says Latin America has also seen solid gains.
Blanco says while Brazil dominates the funds, many other economies in the region are looking positive.
“Inflation is possibly still the weakest link, but active monetary policies will counter this,” he says. “We think 2008 can be just as positive for Latin American equities, as we forecast a 4.5% GDP growth for the region.”
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