Thu, Apr 17, 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. Opalesque Exclusive: European stock-picking fund up 19% YTD, bets on small caps’ high cash level[more]

    Benedicte Gravrand, Opalesque Geneva for New Managers: Here is a European long/short equity fund that has been beating the odds since its 2008 inception by employing its own investment model, frequent company visits

  2. CTAs could face new challenges in a rising rates environment[more]

    Bailey McCann, Opalesque New York: CTAs have taken a beating performance wise lately, and asset flows reports show that investors aren't sticking around to see how the movie ends. Now, a new white paper from Roy Niederhoffer and Coen Weddepohl notes that as interest rates start to tick back u

  3. Investing – Big hedge funds bought Puerto Rico's junk bonds, Fidelity explores new trading venue amid flash trade concerns, Crisis-era Greek bonds reward early buyers with big effective returns, Cargill unit discloses stake in Freddie preferred[more]

    Big hedge funds bought Puerto Rico's junk bonds From Reuters.com: Several large hedge funds doubled down on Puerto Rico in last month's giant bond sale despite the U.S. territory's financial struggles, the Wall Street Journal reported, citing confidential documents reviewed by the newspa

  4. Opalesque TV: First Trust Advisors launches liquid alternatives platform[more]

    Bailey McCann, Opalesque New York: First Trust Advisors is launching a new liquid alternatives platform aimed at building on the companies existing alternative ETFs offering by adding hedged mutual funds. Senior Portfolio Managers Rob Guttschow and John Gambla recently sat down in an

  5. Commodities – Popular value fund manager David Iben bets on Russia, gold,[more]

    From Reuters.com: With large bets on Russia and North American gold miners, one of the best performing stock pickers in the wake of the 2008 financial crisis is back with a new fund that reflects his deep aversion to following the crowd. In the Kopernik Global All-Cap Fund, David Iben is follo