Catechis tips EM financials

Mr Catechis, co-manager of the £17m Martin Currie Emerging Markets fund, said banks in developed markets were struggling to grow due to regulation.

The manager said developed market banks have had their balance sheets constrained by enhanced capital reserve requirements, which has limited their ability to lend, and cut their returns on equity and assets.

“There is a strong probability that emerging market banks will continue to diverge from developed world banks,” he said.

Mr Catechis tipped the Brazilian banking sector and pointed to companies such as Creditcorp in Peru, which has relatively small numbers of loans on its books.

“It’s not going to grow overnight, but there is sustainable growth there,” he said.

The manager added that western financials had been consistently downgraded by ratings agencies over the past year, financials in emerging markets such as Indonesia had been marked up.

“For the past 20 years, emerging markets are the only ones that have been priced correctly from a ratings perspective,” he said.

But he warned political and geopolitical concerns were the greatest factor in shaping the investment outcome in the next decade.

“There is no economic or political leadership,” he said. “The two biggest trade zones, the US and Europe, are trying to work through their own problems.”

He said emerging markets would not be too heavily affected by issues in the western world because production has turned from export-driven to domestic consumption. He added that governments in the top ten emerging market economies were spending roughly $13trn (£8.2trn) on infrastructure, which stood to drive commodities and materials growth in the region.

Mr Catechis and his team took over management of the fund in October 2010 after they joined Martin Currie from Scottish Widows Investment Partnership (Swip).

The fund has delivered top-quartile returns over the one year period to January 27, returning a loss of 5.5 per cent, compared with an IMA Global Emerging Markets sector average loss of 8.4 per cent, according to Morningstar.