Ask The Experts: Identifying Opportunities Within Emerging Markets
Mark Livingston, Product Manager of Emerging Market Equities at FIL Investment Management (Singapore) Ltd, shares with Fundsupermart the various opportunities identified by the Fidelity Emerging Markets Fund.
According to the fund's investment objective, its investment is primarily focused in five geographical regions such as Africa, Middle East and Eastern Europe. What is the outlook for these regions and which areas do you think will experience more favourable growth?
- Emerging markets classified in three areas: Emerging Europe Middle East and Africa (EEMEA), Latin America, Emerging Asia
- Ultimately bottom-up stock pickers
- Greater opportunities now in China and South America
In terms of risk, the Middle East and Eastern Europe markets have been terribly volatile in 2011. Do you see this volatility continuing in 2012?
- Yes, especially in Central Europe
- Many countries in Central Europe are heavily indebted and have exposure to Western Europe and they expect Western Europe to go through a recession and hence the fund is avoiding Central Europe
- Also not big fans of Middle East as many companies are property related and have not recovered from the credit crisis in 2008
The Fidelity Emerging Markets Fund has its third largest geographical allocation in South Africa. What are the investment opportunities within South Africa beyond the gold miners?
- South Africa has a rather diverse economy
- One company the fund is excited about is Shoprite, a food retailer, which is strongly positioned to expand into the rest of Africa
In the same vein, many investors view investing in Russia as a play on oil prices. What other companies does the fund look out for it its investments in Russia?
- Agrees that investing in Russia is a play on oil prices. The Russian equity market generally tracks oil prices
- In 2011, oil prices remained high but the Russian market struggled
- This represents a valuation anomaly and the fund thinks the market will be more correlated going forward
- The fund tries to take advantage of this by investing in the Russian banks
- Sberbank is a play on the valuation anomaly, and it also has excellent credit dynamics
Is there a particular investment idea the fund is bullish or bearish on right now?
- Bullish on Chinese consumer and African consumer
- More negative on India due to a number of structural issues such as high inflation and high interest rates despite relative easing
||: Ask The Experts: Identifying Opportunities Within Emerging Markets