Your Industry  

Investing in Emerging Markets - August 2014



    One possible reason for the improvement is the result of a number of emerging market elections, which have seen voters call for reforms. Prime examples include the emphatic election victory of Narendra Modi in India and the appointment of Joko Widodo in Indonesia.

    Neil Denman, global emerging markets fund manager at Polar Capital, points out: “Year to date the winners in emerging markets from a country perspective are Indonesia, India and Turkey, and the one area that links all of these is elections.

    “We’ve seen in the past 12 months emerging markets performing in line with the MSCI World index in US dollar terms, which is a bit of a change in that we’ve had four years of underperformance. Since 2010 emerging markets have not really been the place to invest.”

    However, he notes that since March 2014 “we’ve started to see some outperformance, and it’s a reasonably longer stretch of outperformance”.

    Of course, the macroeconomic and geopolitical landscape is not all rosy, with Russia and Ukraine topping the newsflow in terms of concerns regarding emerging markets, the latest of which is the tit-for-tat sanctions between Russia and the west.

    Andrew Lister, co-chief investment officer at Advance Emerging Capital, points out that in spite of the negative headlines across the emerging markets, both emerging markets and frontier indices have been making good ground in 2014, with the MSCI Frontier Markets producing a stellar 21.14 per cent for the year to date, according to FE Analytics data.

    He notes: “It is reassuring in one sense but a little bit concerning in another when you have all these headlines and markets are willing to shrug them off. In emerging markets Russia is obviously the biggest one [concern], and long term it is probably an opportunity. You don’t invest in Russia expecting to have a smooth return profile or expect to do so without hitting speed bumps along the way.

    “The market has a long history of not really helping itself with its own politics, and this is another one of those occasions. But what you get in exchange for investing in Russia is some achingly good value assets. What we hear a lot of at the moment is that Russia is a value trap, but it has never been a market that has ever really been expensive, but it has been a market where historically you’ve made incredible returns if you’re willing to take on that headline geographic risk.”

    While the geopolitical landscape is raising concerns, the main drivers of the region, the Brics – Brazil, Russia, India, China, and South Africa – are making their first steps in setting up emerging market institutions, such as a Brics Bank and a contingent reserve arrangement, which will rival the World Bank and the IMF.

    With stronger performance likely to tempt many investors back into the once unloved area, the question will be whether the ambitions of the Brics nations and sweeping reform agendas will be enough to sustain the momentum.

    Nyree Stewart is features editor at Investment Adviser

    In this special report


    Please answer the six multiple choice questions below in order to bank your CPD. Multiple attempts are available until all questions are correctly answered.

    1. In the three years to 2013 the Chinese economy has grown by what percentage?

    2. According to Mike Kerley, Thailand’s National Council for Peace and Order has a three-phase plan to restore order with the aim of restoring a democratic government within what period?

    3. The MSCI Emerging Markets has delivered roughly what performance figure for the year to date to August 7?

    4. The Brics Bank will initially have approximately what amount of capital?

    5. With a return of 18.99 per cent for the year to date to August 6, which of the Bric country indices has performed best?

    6. Who was recently elected president of Indonesia?

    Nearly There…

    You have successfully answered all the questions correctly, well done!

    I completed this CPD in

    To bank your CPD please complete the form below.

    Were the stated learning objectives met?

    Why weren't they met?

    What did you learn from undertaking this CPD exercise?

    Why did you undertake this piece of learning?

    Any comments about this article or FTAdviser's CPD in general?


    Congratulations, you have successfully completed and banked this piece of CPD

    Already Banked!

    You have already banked for this article.

    To bank your CPD you must sign in or


    One or more questions have been incorrectly answered,
 please review your answers and try again.

    Please complete all the above text fields to bank your CPD.

    More Your Industry CPDSee my completed CPDSee all CPD