Posted June 11, 2014 1:38 am by Comments

Smith & Williamson’s Richard McGrath has told FE Trustnet that the next 12 months will see a strong re-rating in emerging markets and that investors should buy into them now as they have reached an inflection point. Moreover, he believes the period of falling markets amid central bank, currency and political fears have bottomed-out and he added that inflows are rising and valuations have bottomed out. McGrath specifically commented:

“Despite all of the unrest in places such as Turkey, Brazil, and Russia/Ukraine – emerging markets have performed in line with developed markets this year. This indicates that valuations have reached a level where all the selling-off has been done. This is an inflection point providing a very good entry point into the asset class.”

And:

“There is the potential to make a 50 per cent return over the next 18 months. My longer run aim is to make a 10 per cent annual return for the fund after this.”

Nevertheless, McGrath has ruled out some emerging markets due to their risk:

“On a geographic basis political risk is something we will very seriously. We currently have ruled out investing in Argentina, Venezuela and Egypt because of this. We’re seeing a lot of value in Brazil, Mexico, China, and Korea. However, where we believe the risk to be short term such as in Russia and Turkey, we use it as a short term entry opportunity. We are overweight in Turkey and neutral on Russia, but we think it is a cheap market.”

And while McGrath still has a positive outlook on India, he commented:

“We were heavily exposed to India but have taken profits recently due to better opportunities elsewhere and the fact our holdings had doubled in value.”

To read the whole article, Emerging markets are at the perfect entry point, says S&W’s McGrath, go to the website of FE Trustnet.

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