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Realism emerges

Emerging markets have come out of recession first but there are still dangers.

Brian Tora’s Investment View

The last few weeks have been bliss. Established, as I was, in a villa overlooking the Algarvian coast, with blue skies, uncluttered beaches and warm seas, I was able to relegate the state of markets to the back of my mind.

Not that I need have worried. Shares have been behaving themselves recently. Last week saw the FTSE 100 index make a spirited attempt at breaching 5,300. For all I know, it may have succeeded by now.

I came back last week with something of a bang. Day one of the return to the real world saw me at the last Association of Investment Companies’ private investor roadshows for 2009. It was a lively occasion.

Aside from the update in the thinking from a pair of respected investment managers, it provided the opportunity par excellence to gauge the mood of the average private investor. And by and large they were positive.

In a way, this was just as well. Later that same week, I was privileged to attend the annual Aberdeen Asset Management Investment Conference. It is always a stylish affair.

While the bulk of the investment input comes from the Aberdeen team, there are usually sufficient independent minded commentators there to ensure a debate of high quality and significant interest.

This year was no exception. My first taste of the prevailing mood came courtesy of Hugh Young, head of equities at AAM. Hugh and I go back a long time. Best known for his knowledge of, and prowess in, Asian markets, he was responsible for establishing the investment process for what has become one of the leading homegrown investment houses on the international stage.

His relaxed approach belies the discipline he exerts over stock selection.The worrying aspect of his current attitude to stockmarkets was that he was finding value difficult to find.

Perhaps the most interesting comments were reserved for Japan, a country which lacked an equity investment culture. As a result, should investors really be surprised when they fail to make money there?

Although not bearish per se, he nevertheless felt that markets were well up with events and that, while a setback was not necessarily inevitable, if one took place it would be no bad thing. He also delivered a welcome dose of realism regarding emerging markets which, whilecoming out of recession ahead of the developed world, did contain some dangers for investors.

He cited the example of Thailand, a country that had grown at 6 per cent compound over the past 20 years but had failed to deliver profits to investors on average.

And China, a country that he understood as well as any western investor, was still capable of delivering shocks to the unwary, as witnessed by the very volatile nature of shares recently.

As for Russia, if understanding the culture of a country was crucial, then you had to understand that this was things at a company level shouldseldom be taken at face value.

Perhaps the most interesting comments were reserved for Japan, a country which lacked an equity investment culture. As a result, should investors really be surprised when they fail to make money there? This assessment of the world’s second biggest economy was echoed later by the panel of economists chaired by Anthony Hilton.

So much interesting material emerged that I feel obliged to return to this conference later but not before I have checked my Japanese  investments.

Brian Tora ( is principal of the Tora Partnership


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