Fund Selector: Could US spring surprise?

John Chatfeild-Roberts

For many years we have been asked about the opportunities within emerging markets.

On a long-term view, with their massive and dynamic populations, the benefits of investing in these regions have seemed crystal clear.

However, no great investment theme is ever a straight line to riches, and the emerging markets are no different.

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At this point in emerging market development, let us look at three key countries: China, Japan and the US.

China, the nation that has thrived from being the outsourcing capital of the world, has lost its labour-cost advantage, which may well mean opportunities for others.

What Japan (or more specifically the yen) does from here is key for many export-orientated emerging economies, as well as countries such as Germany. How do you compete with superior Japanese exports that are becoming more competitively priced by the day?

And the US, the ultimate export destination, though not completely out of the woods yet, has cleansed many of her past ills. She is growing, with a productive labour force, a plentiful supply of cheap energy, and is becoming more competitive by the day – potentially to the detriment of some emerging markets.

Due to their size and growth, emerging markets should not be overlooked. Some Latin American domestic investments look fair value, but the index is dominated by a few big exporters that are best avoided.

Asia is home to some of the world’s great companies and selectively the most well-managed and financially secure are always worthy of consideration. The Russian market should be cheap, and it is. Very. But it is hard to see what will unlock that value.

With the stated intentions of the Chinese leadership, would the best way to exploit the long-term development of the world’s emerging regions be via the largest global consumer-brand companies?

And would it not be ironic if the best performing ‘emerging market’ might just be middle America?

Though if Japan really does pull off the reflation of its economy, then ‘middle Japan’ might just grab this accolade.

John Chatfeild-Roberts is chief investment officer at Jupiter Asset Management