Shift Your Emerging Market Consumer Exposure from MNCs to Local Stocks (FE Trustnet)
Raymond Ma, who manages the Fidelity China Consumer fund, says investors should be gradually reducing emerging market exposure via global MNCs and western market leaders such as Diageo, Unilever and Burberry in favor of more domestic names.
As emerging market economies have grown and a wealthier middle class has formed and expanded, fund managers have been quick to tilt away from exporters towards companies serving this consumer demographics’ huge desire for goods and services. Hence, consumer stocks like Diageo, Unilever, Mulberry and Burberry have all experienced a huge re-rating of their respective share prices over the past 10 years, in no small part thanks to their large and widening operations in emerging markets
Many experts have also long said that these developed market companies are the best way of getting exposure to emerging markets, giving investors the best of both worlds: high levels of growth and good corporate government. However, Ma thinks this method of investing could come under pressure from domestic companies, which are beginning to erode the market share of multinationals. In addition, he commented:
“The impact of Chinese growth in lots of these companies versus their overall growth will come down over the next five or 10 years, but it will be a gradual process… For a lot of Chinese people buying these goods is about showing off. As some people have become successful they have liked to show off their success.”
To read the whole article, Why you may need to re-evaluate your emerging market exposure, go to the website of FE Trustnet.
- Best Consumer Stocks for Emerging Market Investors (Morningstar)
- China Has $67 Trillion in Potential Consumer Spending Over the Next 10 Years (Nielsen)
- Diageo Takes a £264M Writedown on China (The Telegraph)
- China to South America: Consumer Technology Growth in Emerging Markets (KraneShares)
- The Case for Dedicated China Exposure (Cambridge Associates)
- Fidelity China Special Sits Trust: Four China Investment Themes (FE Trustnet)
- Chinese Stocks: Cheap Long-term Play or Value Trap? (FE Trustnet)
- The Perfect Storm Confronting Xi Jinping (Heritage Foundation)
- Perspective Global Equity: Why China A, Why Now? (William Blair)
- Diageo’s emerging market problems deepen (FT)