Emerging Markets manager sees recovery ahead for Mexico, Russia, Turkey and Peru
F&C’s Jeff Chowdhry has increased his fund’s weighting to Mexico, Russia, Turkey and Peru.
The £85m F&C Emerging Markets manager says these markets have strong recovery prospects this year, with favourable valuations.
Chowdhry has increased Mexico to 9% from 5% and Russia to 8% from 6%. At the end of last year, he doubled holdings in Turkey and Peru, each rising to 3% from 1.5%.
“Mexico is a very close, geared play on the US and we are positive of a recovery in the US this year,” he says.
“Russia is a pure valuation play. It did not do very well last year, but the oil price has now stabilised and shares are at a deep discount.
“Peru and Turkey both have cheap valuations. A large proportion of Peru’s economy is linked into the copper price and returning demand, while Turkey is seeing growing domestic demand and is linked into a recovery in euroland,” he adds.
To fund the increases, Chowdhry has reduced South Africa from 6% to 4%, shrunk Korea from 13% to 10% and sold out of exposure to Poland and Thailand.
“In South Africa, there does not seem to be any evidence of a recovery, and valuations are not particularly attractive,” he says.
“Korea tends to do well when the leading OECD economic indicators are bottoming out, and that took place in Q4 2008.”
Meanwhile, Chowdhry is slightly overweight Brazil and India, but maintains an underweight to China.
“China looks like it is going through an air pocket. The Government is looking to control the economy and has tightened the reserve capital level for banks,” he adds.
“The short-term outlook is uncertain, but at some point it will be appropriate to be overweight again.”
