Star equity strategist from JP Morgan is steering investors clear of emerging markets for the third year running, but some of his closest competitors are not adopting quite such a bearish stance.
By Evan Pickworth
A star equity strategist from JP Morgan‚ Mislav Matejka‚ is steering investors clear of emerging markets for the third year running‚ but some of his closest competitors are not adopting quite such a bearish stance.
The head of Europe‚ Middle East and Africa equities at Credit Suisse‚ Stephen Dainton‚ who visited South Africa last week‚ told Business Day his investment house — which is one of the dominant global players‚ together with JP Morgan — is looking to invest "through the cycle" in emerging markets.
"Long term‚ emerging markets will provide a plethora of investable opportunities‚ despite being slightly less attractive than they were."
He said on Friday that South Africa remained a critical component of the company’s strategy to launch into the rest of Africa‚ and that the focus has been on firstly ensuring the South African business had enough scale and relevance.
Credit Suisse terminated its joint venture with Standard Bank three years ago to plot its own course in growing its investment and advisory businesses.
MD and head of equities in South Africa Derek Hompes said on Friday the plan had been to offer broader product offerings and make the business more visible. "We are now well entrenched with the big domestic players‚" he said. With South Africa keen to attract foreign investment‚ Mr Dainton said the company aimed to offer relevance to local fund managers and investors‚ and offer a "voice" to its major network of foreign investors to "attract those capital flows". Mr Hompes said he felt foreign investors would again "bite" in a market like South Africa.
According to market data and Credit Suisse estimates‚ while foreign holding in the South African market is down to 31% from as much as 46% two years ago‚ this trend had recently reversed. Mr Dainton said he was seeing interest in a market like South Africa.
"South Africa retailers‚ for example‚ are some of the world’s best performers over five years. There are a great number of world-class companies in South Africa‚" he said.
The Bank of America Merrill Lynch Fund Manager Survey for March‚ which canvassed 241 money managers with $636bn of assets under management‚ found sentiment towards global emerging markets was reaching a low‚ but "improvement is in sight".
More global investors than ever have sold emerging market assets in the last month‚ according to the survey — to a new record underweight position of 31%.
But investors have indicated they see value in the region‚ with a record net 49% believing emerging markets the most undervalued of the regions‚ compared with a net 36% in January.
South Africa and sub-Saharan Africa economist from HSBC‚ David Faulkner‚ who has previously worked at the Treasury‚ is more in line with Mr Matejka and is bearish on a number of emerging markets‚ like South Africa. His prediction for South Africa’s gross domestic product growth has taken a tumble to just 1.8% this year from 1.9% last year. HSBC has lowered forecasts on South Africa‚ Turkey‚ Brazil and Russia‚ but is bullish on Nigeria’s expected growth of 7%.
Mr Matejka‚ who was the top-ranked equity analyst in the annual Institutional Investor All-Europe equity research rankings‚ said during a recent visit that South Africa and other emerging markets faced tighter liquidity. Slowing economies did not often come up in his discussions with investors.
CEO of Aon South Africa and Africa‚ Anton Roux‚ said on Friday that while he was seeing "growth on the ground" in Africa‚ competition had become tougher than five years ago. He sees intra-African investment as a growing theme‚ where a country like Kenya‚ for example‚ invests into Francophone Africa.
Aon has been ranked as the largest insurance broker in the world based on revenue‚ with Africa seen as a major destination for growth.
Source MSN
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