If investors were asked to give a chunk of money directly to emerging market governments, most would refuse. But in the stampede towards low-cost, index linked investment in emerging markets, many will effectively end up doing just that, according to a report in Monday’s FTfm.
Arjun Divecha, chairman of GMO’s board and manager of three of its emerging markets funds, says GMO research shows that about 35 per cent of the constituents of the widely benchmarked MSCI emerging market index are companies that are owned or controlled governments and that these companies actually account for about 70 per cent of the earnings generated by that index.
Just when things were getting better for investors in Tunisia they got worse again, according to a report in Monday’s FTfm.
Rather than spook investors, the 2011 Jasmine revolution had the perhaps unexpected effect of convincing investors that their investments would be safe from confiscation by the former ruling family.
Investors should look before they leap into investing in Russia, according to a report in Monday’s FTfm, but it is very unlikely that many will do so.
On the face of it, huge strides that have been made in the last year or so will make Russia a more friendly place for overseas investors.
Given all the eurozone bad press, it is unusual to hear from a man who can’t wait for the day when his country enters into the single currency.
But, as a report in Monday’s FTfm explains, for one Romanian fund manager euro entry would usher in a future with more freedom.
China is expected to double its assets under management by 2015, but before asset managers start anticipating a sales bonanza they should take note of some failings, notes Amin Rajan, chief executive of CREATE-Research, in a report in Monday’s FTfm.
The problem is not just the well publicised difficulties with breaking into the tightly controlled distribution market. The difficulty, says Rajan, lies with the investors themselves.
The public debate about the ethics of investing in farmland is being ignored by serious investors who seem to have had no qualms about buying up large tracts of land in Africa, according to a report in Monday’s FTfm.
It could be that they were following the advice of Jeremy Grantham, co-founder of asset manager GMO , who recently recommended a 10 per cent strategic allocation to “things in the ground”. Or it could be that they simply thought it was cheap. Either way, 62 per cent of all large-scale land acquisitions since 2000 have occurred in Africa, according to the Land Matrix Partnership.
Russia seems to have much to recommend it from an investor’s point of view. The economy is expected to grow by 3.5-4 per cent this year, oil prices are on the rise again and Russia’s stock market has plenty of room for upward movement after underperforming emerging market peers for the past five years.
But, as a report in Monday’s FTfm explains, asset managers might have to wait a little longer for the retail funds market to thaw. The wealthy may be flashing their cash, but the Russian landscape remains bleak for most international managers.
Young vibrant populations whose economies show strong growth are good investment bets, or so the general ethos behind investing in emerging markets goes.
But a columnist in Monday’s FTfm asks the unthinkable: is that idea just plain wrong?
John Plender examines the work of economists who think the new pessimism about emerging markets might be here to stay.
For some truly daring frontier market investors Azerbaijan is beginning to look interesting, as a report in Monday’s FTfm explains.
There is no doubt that it has long term potential. In the 19th century Baku became known as the Black Gold Capital of the world and it remains rich in undeveloped petroleum resources. Its position in central Asia between the east and the west on the Caspian sea put it firmly on the old Silk Road and also gave it a rich trading history.
Political leaders in the west have been keeping their eye on Beijing’s $3tn in foreign exchange reserves. If all else fails that amount of money could go a long way, they reason.
But Edward Chancellor, writing in Monday’s FTfm, says China’s forex reserves provide no shelter for anyone, least of all China.
At the end of 2010 Bangladesh started doing that thing that frontier market investors dread. A long stock market rally ended so sharply that it sparked protests by angry investors outside the Dhaka stock exchange. The stock market reversal itself followed days of violent protests by Bangladeshi garment workers demanding promised higher wages.
Any hopes that the change in fortunes would be short-lived were dashed and investors saw 2011 wipe out all the gains the stock market had made in the previous year. But things could be about to get better for investors in Bangladesh, according to a report in Monday’s FTfm.
Could the internet be the answer to distribution woes in emerging markets? One fund manager in Brazil certainly believes it might the solution there, according to a report in Monday’s FTfm.
As in other emerging markets Brazil’s retail distribution channel is dominated by the country’s top banks, which have 75-80 per cent of the market. But Pedro Bastos, chief executive of HSBC Global Asset Management in Brazil points out that this stranglehold could easily weaken in the future.
There has been much talk recently of China’s moves towards full convertibility of the renminbi. And there has been much other talk about the wisdom of removing the Hong Kong dollar’s peg to the US dollar. But a column in Monday’s FTfm proposes uniting those two events.
Richard Harris, chief executive of Port Shelter Investment Management thinks his unusual idea has legs.
The fund management industry in China is a little dysfunctional, as we reported last week, but few claim they can see how to fix it. Which is why an item in Monday’s FTfm makes such interesting reading.
Robert Pozen, senior lecturer at the Harvard Business School, and Theresa Hamacher, president of the National Investment Company Service Association (NICSA), recently returned from the Beijing launch of their book The Fund Industry: How Your Money is Managed, which has been translated into Mandarin.
China, or so everyone says, will deliver untold riches in the end – so the important thing is to be there and to be able to stay the pace.
But many foreign fund managers might be wondering how long they are going to have to wait for the domestic market to opens its arms, as a report in Monday’s FTfm explains.