Fidelity’s Price eyes African consumption
Top-performing emerging markets manager keeping watch over key investment theme.
Fidelity’s $2.7bn (£1.7bn) Emerging Markets manager Nick Price has said he is maintaining a watch over the African consumption story.
Mr Price, who has run the fund since July 2009, said an area he likes but that is “not that investible” at the moment is African consumption, something he called “a very significant trend from a low level”.
The manager said, as an example, beer consumption in Nigeria is nine litres annually compared with 40 litres annually in countries such as Ghana and 100 litres in Germany.
“There is an interesting opportunity there,” he said.
Mr Price said he does not like to invest in companies which have “diluted” exposure to emerging markets, however, the UK-listed SABMiller is a top 10 position he said does give access to the African consumption story. He said the stock is his most diluted in the portfolio.
The manager said the company has 90 per cent of the Colombian market share, virtually 100 per cent of the market in Mozambique and is the “absolute dominant player” in Africa.
Elsewhere, Mr Price said western industrial companies already face strong pricing competition when bidding against Chinese companies but that the latter will become even more dominant in the next few years.
“Chinese industrial companies will be very significant players over the next five to 10 years and that puts a huge amount of pressure on western industrial companies,” Mr Price said.
“It is almost impossible for people to select western companies such as Siemens or GE over something like Shanghai Electric Group in the industrials space.”
Mr Price said there were similar issues in other areas of the market, whereby Chinese equivalents to Caterpillar are roughly 40 per cent cheaper and equivalents to truck manufacturer Man also produce goods far cheaper.
“The level of the price puts industrials globally under pressure,” he said.
“Chinese industrials are on the market share mentality at the moment and are not driving the business for returns.
“But I am still not deploying money towards Chinese companies as yes, they will take share, but they are not looking at returns at the moment.”
Elsewhere, Mr Price said he is underweight Brazil because he does not have a position in the country’s two largest stocks Vale and Petrobras.
“The government has its own agenda in running these companies and won’t focus on shareholder return,” he said.
“That is a major driver for the underweight to Brazil even though long term I see the demographics as fantastic and believe its incredible agriculture strength means it should be the bread basket of the world.”
The fund has delivered 38.8 per cent over three years to May 31 compared with the MSCI Emerging Markets index benchmark of 31.6 per cent, the group said.