GAM Holding AG’s Tim Love, the manager of the JB Emerging Equity fund, has told FE Trustnet that emerging market stocks are set to deliver returns of almost 100% over the next four years. Love was quoted as saying:
“Emerging markets have historically done very well post a hike in US interest rates, typically delivering an uplift three times higher than the proceeding down phase… A normalising of the US yield curve in the next three to six months will be a starting pistol to become more aggressive on deep cyclical stocks, for example shipping and rare commodity stocks. In order to make the most of the opportunity investors need to buy ahead, as soon as a bottoming out of lead indicators becomes visible. The key, as always, will be allocating capital at the right time rather than being paralysed by fear.”
As well as:
“The secular demographic growth drivers for the region also remain intact, particularly the growth in the young population and increased disposable income.”
Love noted that lower oil price have benefited oil importers such as India, China and South Korea and that investors can play the fall through consumer sectors like cheap airlines and electronics. He also believes that Brazil is now a “deep value play” with the country’s recent set-backs now priced into Brazilian share prices and that opportunities are available in sectors such as housing, retailers and oil. In addition, he has a strong overweight to Saudi Arabia due to the opening up of the capital markets there this month plus he thinks there will be a valuation uplift in Argentina with the election in September bringing a “modest bias” to pro-market reform.
Finally and when picking emerging market stocks, Love had these tips for investors:
“To successfully capture [emerging markets’] growth potential investors need to focus on stocks with strong free cash flow, dividend coverage and robust balance sheets. Staying on the right side of global currency moves will also be key.”
To read the whole article, Why emerging markets might double your money over four years, go to the website of FE Trustnet.
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