Emerg­ing mar­kets the choice play­ground for savvy in­vestors

China Daily (Hong Kong) - - HK | BUSINESS - PETER LIANG

The con­tin­ued surge on Wall Street since Don­ald Trump’s sur­prise win in last month’s US pres­i­den­tial elec­tion begs the ques­tion of how much fur­ther it can go with­out trig­ger­ing a ma­jor price cor­rec­tion.

More and more savvy in­vestors have been scout­ing around for op­por­tu­ni­ties to di­ver­sify their port­fo­lios. These in­vestors, tak­ing a longer-term view, are set­ting their sights on emerg­ing mar­kets, in­clud­ing Rus­sia, Brazil and the Chi­nese main­land, where mar­kets are trad­ing at steep dis­counts in terms of av­er­age mul­ti­ples to those of the United States.

Hong Kong in­vestors should note that the cur­rency risk is a ma­jor is­sue when in­vest­ing in emerg­ing mar­kets at a time when the Hong Kong dol­lar’s ap­pre­ci­a­tion in tan­dem with the green­back against most other cur­ren­cies con­tin­ues to gather steam. But, the cost of hedg­ing against that risk seems small com­pared to the po­ten­tial cap­i­tal gains from in­vest­ing in emerg­ing mar­kets.

Var­i­ous fac­tors that will have a fun­da­men­tal im­pact on the economies of emerg­ing mar­kets have caught the at­ten­tion of stock an­a­lysts and in­vestors. The lat­est rise in the prices of a wide range of com­modi­ties, par­tic­u­larly oil, can help re­verse the for­tunes of Rus­sia and Brazil. Mean­while, re­cent trade and other key eco­nomic data sug­gest that the Chi­nese main­land’s econ­omy is slowly re­gain­ing its foot­ing.

Cit­ing fig­ures com­piled by Leuthold Group — an in­de­pen­dent mar­ket re­search firm — the New York Times re­ported that emerg­ing mar­ket stocks are trad­ing at an av­er­age price-to-earn­ings ra­tio that’s 53-per­cent lower than that of US stocks, com­pared to the his­tor­i­cal av­er­age of about 20 per­cent. Hong Kong-listed H shares of main­land en­ter­prises seem like even big­ger bar­gains as they are all traded at vary­ing dis­counts to their equiv­a­lent A shares listed on the Shang­hai ex­change.

Rus­sia and, to a lesser ex­tent, Brazil will ben­e­fit from higher oil prices aris­ing from the de­ci­sion of the Or­ga­ni­za­tion of Pe­tro­leum Ex­port­ing Coun­tries (OPEC) to cut pro­duc­tion. The price of bench­mark crude has al­ready risen to more than $50 per bar­rel and is widely ex­pected to climb fur­ther to be­tween $60 and $70 a bar­rel next year. The In­ter­na­tional Mone­tary Fund has pre­dicted that Rus­sia’s econ­omy will grow by more than 1 per­cent in 2017 — up from an es­ti­mated 0.6 per­cent in 2016.

If you’re in the game, there’s no short­age of emerg­ing mar­ket funds of var­i­ous com­bi­na­tions for you to choose from.

MICHAEL NAGLE / BLOOMBERG

Savvy in­vestors are set­ting their sights on emerg­ing mar­kets, in­clud­ing Rus­sia, Brazil and the Chi­nese main­land, where equities are trad­ing at dis­counts in terms of av­er­age mul­ti­ples to those of the United States.

Newspapers in English

Newspapers from China

© PressReader. All rights reserved.