Five post-crash bets for the road ahead
By , 25 Aug 15
Industry experts come together and select their best investment calls for the post-crash environment.
Emerging markets
Despite consensus not looking favourably on emerging markets, Sleep sees enough macroeconomic tailwinds to warrant pockets of investment – including China.
“The low oil price is unequivocally good for everyone except oil-producers,” he said. “It keeps a lid on inflation, and gives people in the non-commodity producing nations more spending power.
“We are overweight Asia, and, while China is not one of our favourite plays per se, it is an oil-consuming nation, and the economy will see increased spending power. Yes, economic growth is weaker than we thought it would be, but retail sales in China have gone up every month this year. So, while there are internal issues, GDP growth is still going to be good.”
Willis is less convinced, but agrees that there is a case for EMs, particularly India.
“Emerging markets are an investment opportunity for the brave,” he said.
“A lot of the tailwinds that have carried them for the last decade are reversing – China, interest rates and low commodity prices are now headwinds. Furthermore, there are individual nations such as Russia and Brazil that have their own domestic issues as well.
“That said, poor performance in EMs is more justified than it is in developed markets. There are some bright spots in there, but once the market takes a view then everybody gets carried out, and that is often the way with emerging markets.
“India takes longer to implement policies than China because it is a democracy, and is also a bit mired in bureaucracy, but it is the brightest prospect.”
Funds held: (Sleep) Invesco Perpetual Asian, GS India Equity Portfolio, Charlemagne Magna Emerging Markets Dividend
(Willis) Hermes Global Emerging Markets, Hector Sicav Eagle Emerging Markets Equity
Tags: Bonds | China | Investment Strategy
