Keys to investing in emerging markets

the developing markets They are back in the spotlight of major international investors. between november and february, Stock buying in stock markets in developing countries increased by 51 percentage pointswhich is the largest recovery everentity, according to the latest monthly survey of Bank of America managers. This momentum contrasts with his more cautious view of sustainability gathering stocks in mature markets.

“The headwinds that have hampered emerging markets in recent years seem to be turning into tailwinds. Financial conditions are softening and credit markets are starting to open up again with new issuances.”

the Reopening of China on hand The end of the Covid Zero policy With the deployment of an arsenal of government stimulus measures, it is imperative that investor interest in these areas revive. “We haven’t counted on him for the past three years. It sparked some of the euphoria that capital markets felt in January. If the Asian giant wakes up, it could become a white swan by 2023. Jose Maria Luna, founding partner of Luna & Sevilla Asesores Patrimoniales, explains that this is affecting the economies of Southeast Asia and other parts of the world.

For Alejandro Arevalo, director of Jupiter AM, “It will probably save China reopening Solid positive macroeconomic backdrop for emerging markets this year. Its growth rate is expected to increase, buoyed by the $4.8 trillion in savings accumulated by Chinese consumers during the Covid-19 lockdown.”

Despite the improved prospects for these markets, Experts are careful. Continuing global uncertainty due to geopolitical tensions and A new crisis of confidence among international investors will be fatal for these regions.

Apart from this, Victor Alvargonzalez, co-founder of Nextep Finance, recalls that High interest rates in the United States complicate financing for companies and countries in emerging economieswhich The dollar’s relative strength is very negative for developing countries in general and Latin American countries in particularand that Low oil and commodity prices shadows of these markets.

Anyway, in An environment that seems more conducive to riskProfessionals know there is Many investment opportunities in heterogeneous emerging markets. “They provide the average investor with an interesting element of profitability/risk as well as greater diversification,” says Jose Ramos Ponferrada, advisor at A&G Private Banking. Preferably play this game Through funds and exchange-traded funds (Exchange Traded Funds) but is only suitable for investors with a risky and moderate profile. Emerging assets should account for between 5% and 12% of your global portfolio, according to experts.

Asia in the spotlight

Asian stock markets are now in the spotlight. An area where risk is offset by profitability, as it is at a different stage of the cycle,” which may be more directly favored by China’s opening up and increased consumption, Ponferrada notes. A&G is present in Asia (excluding Japan) with two funds: Fidelity Equity Sustainable Asia and the Morgan Stanley Asian Opportunities.

Luna, who is betting Asia this year on other emerging regions, really likes Fidelity Funds – Asia Pacific OpportunitiesI will choose the Fidelity Funds – China Focus and the Invesco China Focus Equity For being products focused on local demand

He asserts that it is possible to be in markets with a “very conservative philosophy”, with low volatility, with companies with betas of less than 1 in relation to each of their benchmarks. With these coordinates point to Robeco QI emerging conservative stockswhose portfolio is heavy in Asia.

Experts generally think so The stakes are higher in the other big emerging bloc, Latin America. However, Juan Jose del Valle, an analyst at Activotrade, appreciates opportunities in Brazil, which has grown by more than 3% in recent quarters, with inflation quickly reversing (from 12.1% in April 2022 to 5.8% currently) and interest rates at 13.75%. And Del Valle adds that the Chinese reopening favors the country of Rio de Janeiro, because it is one of its main trading partners in industrial mineral exports.

Four attractive Brazilian companies stand out due to their valuation and dividend payment (currently above 4%-5% annually), which can be run in dollars because they are listed through an ADR (American Depositary Receipt) in the US: Petrobras, Itau Unibanco, Vale and Banco do Brasil. But for a European investor who wants to diversify risk, ETFs with exposure to the country would be more suitable, such as iShares MSCI Brazil UCITS (IQQB) and the Lyxor MSCI Brazil UCITS (RIO)listed in euros on the German and French stock exchanges, respectively.

Fixed income options

Del Valle thinks so Fixed income from emerging countries may also be interesting at these levels. For the investor’s peace of mind, I prefer short-term currencies in hard currency (Euro or Dollar). “now, The Brazilian bond, which has a maturity of 6 months, gives a yield of more than 14% in local currency. We can also find debt securities of said issuer denominated in dollars that pay a yield of more than 5%, for example Brazil 8.875% 15apr2024 USD (US105756AR10),” he argues.

On Jupiter AM, they are currently searching The best corporate bond opportunities in Latin America and Africa.

However, Luna will choose to invest in China’s fixed income through DWS China Bonds; In local currency points to Emerging Markets Domestic Debt at Capital Group and the The emerging local association of the Greater Amman Municipality; and the The short duration of the emerging Ashmore market If you are looking for a product with a short term portfolio.

To bring together “the best of both worlds, stock market and debt,” Jose Maria Luna tends to invest in a hybrid fund, Carmignac Portfolio Emerging Heritage Collection.