Investment managers – Edmond de Rothschild, Guinness Global Investors and Franklin Templeton – share their insights on the case for emerging markets, which has been tested by the Middle East conflict.
Despite fears about the impact of the Middle East conflict,
which has tested the resilience of Asian and emerging markets,
many of which are oil importers, experts at Edmond de
Rothschild, Guinness
Global Investors and Franklin
Templeton remain optimistic about the outlook for these
counties.
Many wealth managers also believe that the worst of the economic
impact from the Iran conflict is behind them, although it is
still too early to conclude that a sustained recovery is
underway.
This week, a US official said that the US and Iran have agreed to
pause their attacks and allow vessels to move through the Strait
of Hormuz which is essential for global oil markets. Although an
interim peace deal was signed on 17 June, technical
talks between both sides still need to resume in order to
finalise an end to the war.
In a recent interview with this news service, Fang Liu at
Geneva-based Edmond de
Rothschild said that many Asian countries rely on oil
imports. “China is the biggest importer of oil, with about 45 per
cent coming from the Middle East,” she said. However, like
a number
of wealth managers such as Edmund Shing at BNP Paribas
Welath Management, she said that China still has plenty
of stocks to keep it supplied for a few months, making it quite
resilient in terms of energy supplies. Although it still relies
on fossil fuels, China also produces more than 80 per cent of all
solar photovoltaic panels, half of the world’s leading electric
vehicles and a third of its wind power. Liu also believes that
the relationship between China and the US has stabilised.
India and Japan are also highly exposed to oil imports from the
Middle East. However, Japan has plenty of stocks to keep it
supplied for several months while India is more vulnerable.
Her stance was shared by Lisa Wang from California-based
Franklin Templeton Investment Solutions who is positive
about the outlook for emerging markets, driven by tech. Within
their multi-asset portfolios, Wang told this news service in an
interview last week, they are overweight in emerging
markets, notably Korea and Taiwan, as well as US equities.
“Despite the Middle East conflict, we kept our overweight in
emerging markets last year,” she said. “Asia has been affected by
the conflict but we have kept our positive view. We are
underweight in Europe and the UK,” she continued. “We remain
cautiously optimistic about the market outlook and on a
resolution to the Middle East conflict.” However, although
many believe that tensions between China and Taiwan have reduced
recently, Wang thinks that China ultimately sees Taiwan as part
of its territory.
Mark Hammonds, portfolio manager, Asian and emerging markets
at London-based Guinness
Global Investors, also remains optimistic about the outlook
for emerging markets, despite the conflict.
He believes that deepening trade links between emerging market
economies means that intra-emerging market trade is accounting
for a larger share of global trade as a whole. This helps create
a degree of insulation from external shocks and allows emerging
market countries to diversify their supply chains away from
established trade relationships.
Rising incomes and an increasingly urbanised population within
emerging market economies are also allowing local companies to
focus on internal markets while drawing the attention of
multinational ones to invest in the region to gain a larger
market share.
Hammonds co-manages the Guinness Emerging Markets Equity Income
strategy which aims to provide investors with capital growth and
income by investing in emerging markets worldwide, providing
returns of 8 per cent. The fund is exposed to dividend
paying companies in emerging markets worldwide. He invests in
companies with good track records.
Top holdings include Taiwan Semiconductor Manufacturing Company
(TSMC), Taiwan’s Elite Material in the electronics supply
chain, Taiwan’s Hon Hai Precision Industry in electronic
manufacturing, Mexico’s Coca-Cola Femsa and China’s Anta Sports.
Top countries are China, Taiwan, Brazil, India and Mexico. Top
sectors include financials, tech, consumer staples and
discretionary.