Hermes emerging markets head bullish on innovation and China
SINGAPORE: HermesInvestment Management’s head of emerging markets sees a huge opportunity in the Chinese economy’s transition from low- end to higher- end manufacturing and is also bullish on the country’s banks.
Speaking at the Reuters Global Investment 2018 Outlook Summit, Gary Greenberg said he thinks China’s authorities will struggle to wean their economy off high levels of indebtedness, and in order to cut debt as a proportion of economic growth, they will need higher productivity.
“Lo and behold, China is buying as many robots as it can. The increase in robots is unbelievable, in factory automation, in science, the internet of things, smart cities, smart factories, smart infrastructure, smart cameras.
“China is embracing industry 4.0, which is basically the marriage of industry and electronics. That’s a theme we are investing in as much as we can,” Londonbased Greenberg told the Reuters Summit in Singapore.
As part of that theme, Hermes’s Global Emerging Markets Fund, which manages US$ 6 billion, holds stocks such as Chinese video surveillance product maker Hikvision andAlibaba,India’sTech Mahindra and HCL Technologies and Taiwan’s Advantech Co.
Greenberg says that Hikvision, which has gained more than 150 per cent this year, is the best performer in 2017 among his stocks.
His fund invests only in listed companies based in emerging markets. Greenberg’s team follows a mostly bottom-up approach to picking firms that are long-term compounders, meaning their returns are more than the fund’s cost of capital.
The fund is overweight on China, Taiwan and India and underweight Malaysia, South Korea and South Africa - positions which Greenberg reckons will extend into 2018. He doesn’t believe emerging markets are overvalued, although Mexico, the Philippines and India are seen as relatively expensive. — Reuters