Sat, Oct 25, 2014
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Global emerging markets benefit from economic advantages over developed markets, according to Barings

Wednesday, April 01, 2009
Opalesque Industry Update:

… indiscriminate sell-off of emerging markets in 2008 has created a window of opportunity for investors …

Although Global Emerging Markets (GEMS) have suffered as the global economic environment continues to weaken, relative to developed markets they are outperforming, according to Baring Asset Management (Barings). This outperformance has been driven by a number of economic improvements, including the outlook for emerging fixed income markets, as local currency debt and corporate bond markets show recovery.

James Syme, manager of the Baring Global Emerging Markets Fund, explains: “As many developed economies in the Western world are in recession, the world’s less developed economies, the emerging markets, become increasingly important. Many of these economies learned painful lessons during the 1997 – 1999 crisis and as a result are much better equipped to deal with today’s global financial problems.

The emerging world can boast higher savings to GDP ratios compared to the developed world with much lower consumer indebtedness, current account surpluses, youthful populations and stronger banking systems.

“Although in 2008 the financial crisis led to sharp corrections in many emerging equity markets, we believe that this almost indiscriminate sell-off has created a window of opportunity for investors who are prepared to take a medium to long term view. Investors have the chance to build-up exposure at relatively depressed prices to areas that we still expect to exhibit strong earnings growth.”

Barings takes a defensive short-term stance on Global Emerging Markets given that these regions will continue to be affected by the global financial crisis. James Syme continues, “Emerging economies have significant exposure to the global economy, through energy and metal production, processing and technology and consumer product manufacturing. In the absence of any signs of recovery, we are cautious on the more economically-sensitive sectors, such as energy, materials, consumer discretionary, industrials and technology, and also on countries with significant exposure to these sectors. “

However, in the medium to longer-term Barings is confident that selected emerging markets offer strong domestic demand potential coupled with the capacity for pro-growth fiscal and monetary policies. James Syme explains: “In a world of slower global growth and tighter liquidity, economic growth is likely to be stronger in countries where policy can offset the impact of worsening global conditions. Fiscal and current account surpluses, large foreign exchange reserves, limited short-term foreign debt and high real interest rates are all characteristics we look for at a country level. State spending increases have already been announced in China and Russia, while monetary policy could be eased significantly in Brazil, Mexico and China.

“At the stock level, we expect outperformance from companies with strong cashflow and balance sheets and secure market positions in sectors less exposed to the global economic cycle. In this regard we like food and beverage production and retailing, telephony, media and consumer services such as insurance, education and healthcare provision along with selected consumer banking stocks.”

The Baring Global Emerging Markets Fund offers investors an attractive and convenient means of participating in the equity markets of the emerging economies of the world. The fund invests in a concentrated portfolio of 50 – 60 holdings, selected on a ‘Growth at Reasonable Price’ basis, seeking under-recognised growth opportunities that will deliver positive earnings surprises.

The Fund outperformed the MSCI Emerging Markets Index over 2008 and is ranked in the top quartile of the emerging markets universe over the last one, three and five years*.

*Source: All performance Morningstar as at 27.02.09. NAV per share basis in sterling with net income reinvested.

www.barings.com

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   

Banner

Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Commodities - Oil wreaking havoc on small-cap energy stocks sliding 36%[more]

    From Bloomberg.com: Owning almost anything in the U.S. stock market has been a losing proposition since September. Owning smaller energy companies has been a catastrophe. Hercules Offshore Inc. and Resolute Energy Corp. are among 19 oil-and-gas equities in the Russell 2000 Index that lost more than

  2. Investing - Hedge funds favor equity long/short, Strategic bond managers hedge against further high yield sell-off[more]

    Hedge funds favor equity long/short From Securitieslendingtimes.com: Equity long/short strategies will generate good returns for hedge funds in the future, according to a panel at this year’s Risk Management Association Conference on Securities Lending in Naples, Florida. Panellists Sand

  3. Legal - Ex-hedge fund analyst weeps as judge hands down 5 year sentence, Former Columbus investment manager Steven P. Moore indicted on theft charges, SEBI confirms ban for Hong Kong hedge fund, SEC announces enforcement action against compliance officer[more]

    Ex-hedge fund analyst weeps as judge hands down 5 year sentence From Hereisthecity.com: An ex-hedge fund analyst was sentenced to 5 years in prison for his role in insider-trading scheme. The New York Post reports that former hedge fund analyst Matthew Teeple was sentenced Thursday to fiv

  4. Goldman in talks to acquire IndexIQ[more]

    From Bloomberg.com: Can Goldman Sachs put ETF investors on a liquid diet? Goldman is in talks to acquire IndexIQ, Reuters has reported. Index IQ is a small exchange-traded-fund firm known mostly for products that replicate hedge fund strategies, called "liquid alternative" ETFs. While IndexIQ has 11

  5. Other Voices: CALPERS dilemma should be a warning to hedge funds wanting institutional investors[more]

    From Ian Hamilton, founder of IDS Group. A quick comment on the CALPERS’ disinvestment from the hedge fund market and the jitters it is causing. Pension Funds should not be sheep and follow CALPERS’ decision as the issues that CALPERS has with hedge fund investments are in many ways unique t