Emerging Markets: Bargain Buys

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Emerging Markets: Bargain Buys

Taken from On Target 262

 Emerging markets offer many attractive firms that offer growth regardless of conditions in their domestic economies, say New York asset managers Jennison Associates.

Emerging-market companies have challenges different from those of their developed-market counterparts that spur them to innovate and disrupt existing practices. “They are moving up the value chain, from export-oriented business models built on low-cost labour and cheap manufacturing to higher-value-added businesses based on technological and scientific innovation.

“Low recognition of these dynamics by investors and indexes creates an opportunity for growth-minded investors. Add to the mix companies that execute well to exploit a superior economic growth backdrop and the opportunity set expands.”

FullerTreacyMoney  says this is happening in Asia in the context of a continuing expansion of the middle class. But the next decade is much more likely to be an India, Indonesia, Vietnam, Thailand and Philippines-led story than a China one.

Foreign ownership of stocks in Southeast Asian countries such as Indonesia, Thailand, Malaysia and Philippines are at almost historic lows. A significant number of funds specializing in these markets hold zero positions in those countries. Global holdings of such funds account for about 7 per cent of all global mutual funds under management.

It won’t take much to spur such depressed emerging markets, says NTAsset fund’s Kenneth Ng, as most of them are increasingly popular with smaller investors and new investors are coming into them. With his own funds’ portfolios trading on 9.6 times current year earnings on the back of 46 per cent earnings per share growth, and with a next year’s forecast of 20 per cent earnings rise, “we should see strong momentum going into 2021/22.”


Emerging Markets: Bargain Buys taken from our ‘On Target Newsletter’ issue no 262

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