“The move from ‘beloved’ to ‘loveless’ for emerging market stocks in recent years has been extraordinary to witness and observe as a classic counter opportunity,” says Tom Becket, investment chairman of Psigma Investment Management.
“When there is such a great change in sentiment, we usually find wonderful opportunities at attractive prices — we cannot find greater potential for the future than the Asian stock market. Markets like Hong Kong and China have many companies that offer great potential for growth in earnings, as well as attractive valuations.”
“We forecast that the largest slowdown experienced by Asian companies, in regards to the growth of earnings, will be reversed next year, bringing new funds to the region’s markets and buoys.”
“When you combine the potential of undervalued growth that has been ignored in Greater China with the promise that India will expand sensationally over the next decade, then Asia as a whole should do better and deserve more respect from investors,” says Becket.
Great potential: China should not be underestimated or ignored, says investment expert
Ross Teverson, fund manager at Jupiter Global Emerging Markets, says: “China is one of the most important markets in the world. While China currently faces challenges of managing change in its economy, from an industrial model where growth is driven by government investment to an individual model driven by domestic consumption, they remain optimistic about the prospects of many Chinese companies.”
“At the company level, we see significant differences between companies that think they are capable of accepting and benefiting from the evolution of the economy and those we think are likely to resist change. It seems probable that this division will only become increasingly evident as Chinese leaders continue to drive reforms, and returns in the economy will be more noticeably different between these two types of companies.”
Teverson adds, “It is worth noting that at present, stock market valuations of emerging markets are relatively depressed when compared to historical values. Sometimes in the past, when valuations were at or around these levels, investors willing to look beyond short-term challenges earned strong long-term yields. However, we are aware that past performance is not a definitive guide for the future.”
“In many cases, however, we believe that this year’s volatility has created a good opportunity for oversold stocks that still enjoy a positive outlook in the medium and long term.”
“On the other hand, given that emerging markets have lagged behind developed markets, we must be able to find companies with better potential growth prospects who are effective, but significantly cheaper than their peers in developed markets,” says Teverson.