At a fund manager conference in London earlier this week, David Fuller of Fuller Money announced that in general he didn’t much like investing in the kind of places he liked living in. He likes living in low-growth, developed countries, and investing in high-growth, emerging economies. This is a strategy that has made particular sense over the last few weeks: as Western markets have whipsawed all over the place in response to the credit crisis, emerging market nations have showed resilience, says Thisismoney.co.uk.
Most analysts put this down to the recent decoupling of global markets. The likes of China and India have now developed to the point where they are able to keep growing regardless of the state of the US economy – or so the story goes. MoneyWeek isn’t entirely convinced on this one. We suspect that Asia remains more dependent on exports to the US consumer than the bulls would like to think. However, we do think that there are themes connected to the region that make sense for the long term. One is agriculture, which we looked at at length in Buy a farm – or agricultural stocks. But we look at two others below.
Long term themes: infrastructure
With India resurrecting its road system and China building itself out of all recognition in preparation for the Beijing games, infrastructure is a rich vein to tap. It is estimated that $1trn will be spent on infrastructure in emerging markets. You can buy into the boom through the iShares Macquarie Global Infrastructure ETF (INFR), but also keep an eye out for 3i’s new Indian infrastructure fund, which has raised $1bn to invest in Indian ports, airports and road projects.
Long term themes: middle-class consumption
As wages rise, the new middle classes of Brazil, China and India are busy filling their homes with the trappings of a Western lifestyle – fridges, phones and TVs. Brazil’s low mobile phone penetration, for example, makes a company like América Móvil a very interesting play on the Brazilian consumer, according to Blackrock’s Will Landers. Brazil’s emerging middle class has been the driving force behind Landers’ Blackrock MLIFF Latin America fund, which has returned 220% over the last three years. The Gartmore China Opportunities and Fidelity South East Asia funds are also good plays on the Chinese consumer. Both are well managed and have good performance records.