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25% Growth emerging

Martin Currie fund manager picks out Brazil and Turkey

Martin Currie emerging markets manager Dariusz Sliwinski expects to see 25 per cent growth across emerging markets next year compared with an anticipated 14 per cent from developed markets.

Sliwinski says emerging market growth is being driven by major improvements in the fiscal performance of central banks and particularly points to Brazil and Turkey as having potential for growth.

The fund, which holds 62 stocks at present, has benefited from a reduction of volatility across emerging markets and Sliwinski says there has been major progress in the Bric countries – Brazil, Russia, India, China – to reduce debts.

Sliwinski says the central banks in Brazil and Turkey have stopped overreacting to external and internal economic factors by not immediately raising interest rates in response to volatility.

Strong growth is being helped by low valuations and Sliwinski says the explosion in consumer spending in emerging markets has influenced his decision to become overweight in consumer discretionary stocks as well as retail companies, tour operators and local airlines.

The fund is also overweight in financial stocks such as Mexican bank Corporacion Geo and Asian tech stocks such as China Mobile. Sliwinski believes the potential for mobile phone expansion is huge and underestimated in emerging markets.

The fund is underweight in healthcare as Sliwinski believes it is a small and expensive market in the sector.

Concerns over inflation and the market have led to a reduction in exposure to US-focused stocks over the last nine months, he says.

He says: “Brazil is net debt-positive and the macro-economic picture is very good. Consumers are gaining access to consumer credit and many now have access to mortgages for the first time. They are very unleveraged with huge potential to become leveraged.”

“There have been three years of unprecedented growth in emerging markets so some profit-taking was inevitable in May and June. The Turkish currency dropped by 70 per cent and Brazil’s by 16 per cent but both have recovered.”

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