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The emerging question

I asked a question during a press conference the other day and, while that may not sound particularly momentous to you, it certainly felt that way to me. You see, I’ve been doing this investment journalism thing for 12 years now and I’ve rather prided myself on never having said a word at a press conference.

Yes, I know that’s a bit obtuse and maybe even deeply ill-mannered towards my hosts but I’ve always reasoned that if the question was any good, I wouldn’t want to ask it in front of the competition. And, if the question was stupid, well, then I definitely wouldn’t want to ask it in front of the competition.

So what mighty issue could possibly have inspired me to break my vow of silence? How very kind of you to ask – as it happens, it was emerging markets. Already you may be thinking – emerging markets? That doesn’t seem any great reason to interrupt such an impressive run of Trappist-like journalism – and ordinarily you would probably be right.

The thing is, I’ve been deeply scarred by emerging markets fund managers of late and I really needed – I can barely bring myself to type the word – but, yes, I needed closure. And a press conference where the good, good people of BNY Mellon Asset Management had lined up no fewer than five emerging markets fund managers from its assorted investment operations seemed a good place to try and find it.

Call me a naive and romantic fool but I really believed the theory of decoupling. You know the one – emerging markets managers were beating anyone they could corner around the head with it for about a year but now never mention it unless it’s preceded by the words “myth of” or “death of”.

Decoupling is – was? – the idea that the evolution of emerging economies is no longer determined by the fortunes of the US and Europe on the back of, among other things, a reliance on the West as export markets. Over the last year or so, of course, what that really boiled down to is the degree to which the Far East could insulate itself from any slowdown in the US economy and…

Ah. So my question was, if we politely accept that decoupling was at best a red herring, could the assembled managers distil the point of emerging markets investing to its purest form? Essentially, please could they help me to believe again?

The credit crunch has been an unwelcome export from the developed world to the emerging markets, conceded Hugh Hunter, head of global emerging markets at WestLB Mellon Asset Management, with a degree of understatement. However, as things stabilise and liquidity starts flowing back, people will once again remember the fundamentals – such as economic growth in emerging markets will be higher.

Emerging markets will grow in financial importance for the world economy, he went on to assert, and indeed people will come to realise they form a growing part of everybody’s life and so it is right to be invested there.

Furthermore, added Jason Pidcock, director of investment management (Far East equities ex Japan) at Newton, while the credit crunch has affected everyone, differentiation will be seen on the way back up, with the emerging markets set to enjoy a more V-shaped recovery.

Don’t forget, emerging market debt can offer equity-like returns without equity-type risk, chimed in Alexander Kozhemiakin – as one might expect from the manager of the BNY Mellon emerging markets debt fund. It’s a long-term growth story, came the simple answer of Roger Poppe, manager of the BNY Mellon Brazil equity fund and a man of few words unless you get him on the subject of Latin America.
After graciously apologising to me on behalf of emerging markets fund managers everywhere, Hugh Simon, chief executive of Hamon Investment Group, added there would always be issues that spooked investors into withdrawing liquidity from developing economies.

As such, he said, the trick is to fall in love with emerging markets earlier in the cycle so one can be selling when everybody else is buying. I’d always been led to believe time was a great healer. So, apparently with emerging markets, is timing.

Julian Marr is editorial director of marketing-hub.co.uk

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