The Big Question - What is your emerging market strategy following the recent sell-off?
Emerging markets remain fertile ground for identifying change in corporate prospects from which investors can profit. Investors should not let the market’s preoccupation with the impact of QE tapering mean that compelling opportunities are overlooked.
In some markets, the recent volatility has created mispricings. Yes Bank in India - sold down in the recent market rout, is now pricing in either a liquidity crisis or an escalation of bad loans. Neither scenario is likely, given minimal change in corporate deposit behaviour and the bank’s selective lending practices, and today’s share price offers cheap exposure to a strong long-term growth story for Indian private sector banks.
In other markets, we see change at the company or sector level that is powerful enough to ultimately overwhelm today’s macroeconomic concerns. For example, Magnit – Russia’s largest food retailer, is building an unassailable supply-chain advantage in an underdeveloped sector that could drive positive revenue and earnings surprises for years to come.
Ross Teverson, Investment Director, Emerging Markets, Standard Life Investments
First Published in Investment Week on 09th September 2013