Van Eck’s portfolio manager of emerging markets equity strategy, David Semple, said investors should not discount emerging markets as there are specific companies that will deliver growth.
“As emerging markets become bigger, the key is to be very specific about where to invest. There are companies in the technology, health care, tourism, education and insurance sectors that will generate higher profitability this year,” Mr Semple said.
Mr Semple also said that when it comes to China, investing in “new China” is preferable.
“We invest in the ‘New China’, focused on things like clean air, clean water, clean governance.
“It’s also worth noting that offshore Chinese shares are historically relatively cheap compared to other emerging market and developed market countries,” he said.
Mr Semple noted that an all-cap strategy is also essential when investing in emerging markets. He said that this is because large caps are trading at a significant premium to other companies in emerging markets, culminating in a “quality growth bubble”.
“Considering all-caps is important as we do not see overvaluation in mid- and small-cap ‘quality growth’ stocks. Further we think that in a world that is starved of opportunities the better certainty of growth that tends to come from companies with quality characteristics, deserves a premium,” he said.
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