Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.
Ben: What countries are most attractive right now?
Andrew Foster: Vietnam is well positioned. Some investors are concerned that its growth model isn't very healthy, since the state sector is not particularly well managed and creates distortions in the economy. But the private sector is vibrant and growing quite rapidly.
China and some of the other more developed emerging markets in Asia have been shifting their manufacturing bases to lower-cost economies. Vietnam stands to gain much of that business. Meanwhile, on the domestic front, Vietnam continues to make sound regulatory changes, even if those changes haven't always pleased the market. For example, some investors are worried about heavy-handed regulations on Vietnam's banking sector, but those concerns are misplaced. The regulators are acting in quite a benign way to promote medium- to long-term growth by forcing some consolidation among the banks and clamping down on certain speculative activities.
There's also a lot to be excited about in Malaysia. Some interesting economies and sub-industries have begun to spring up there. For example, Malaysia has a growing medical equipment sector, and a number of burgeoning financial services industries. With regard to the latter, Malaysia has a leading global position in Islamic finance, predominantly serving Southeast Asia. These are intriguing niches where Malaysia has managed to secure a foothold and become quite competitive. On the other hand, the economy as a whole does have a fair bit of export sensitivity, and that could be problematic during a global downturn.
South Korea is another market that offers opportunity. Samsung Electronics (Korea: 005930, OTC: SSNLF) and Hyundai Motor (Korea: 005380, OTC: HYMTF) have become strong enough to practically dominate their industries. South Korea also has some very competitive and well-managed companies that are incredibly cash generative, but have yet to see their valuations rise to reflect their underlying fundamentals. Those stories are lost behind the excitement over the country's export competitiveness.
There's been a bifurcation in the market's opinion about whether to favor companies that produce impressive top-line growth, but whose cash flows are not nearly as strong, or companies that produce strong cash flows, but have more moderate growth. That's created a situation where investors interested in South Korea can still find defensive, undervalued names with attractive yields.
Thailand deserves attention too. We're reasonably positive about Thailand's political outlook, as well as the country's recovery after last year's floods. The economy seems to be picking up momentum after a difficult 2011, and we've been excited to see many Thai companies that had suffered serious setbacks regain lost ground. There's reason to be optimistic about Thailand in that context.
Mexico also has a robust economy. It does have linkages to Europe, and there has been concern about the narcotics wars there. Despite those issues, the economy has been surprisingly stable and productive. And there are Mexican companies that offer attractive dividend yields and have healthy, unlevered balance sheets.
Comments
http://www.investingdaily.com/15227/emerging-market-stocks-the-bric-is-just-the-beginning
Ben: What countries are most attractive right now?
Andrew Foster: Vietnam is well positioned. Some investors are concerned that its growth model isn't very healthy, since the state sector is not particularly well managed and creates distortions in the economy. But the private sector is vibrant and growing quite rapidly.
China and some of the other more developed emerging markets in Asia have been shifting their manufacturing bases to lower-cost economies. Vietnam stands to gain much of that business. Meanwhile, on the domestic front, Vietnam continues to make sound regulatory changes, even if those changes haven't always pleased the market. For example, some investors are worried about heavy-handed regulations on Vietnam's banking sector, but those concerns are misplaced. The regulators are acting in quite a benign way to promote medium- to long-term growth by forcing some consolidation among the banks and clamping down on certain speculative activities.
There's also a lot to be excited about in Malaysia. Some interesting economies and sub-industries have begun to spring up there. For example, Malaysia has a growing medical equipment sector, and a number of burgeoning financial services industries. With regard to the latter, Malaysia has a leading global position in Islamic finance, predominantly serving Southeast Asia. These are intriguing niches where Malaysia has managed to secure a foothold and become quite competitive. On the other hand, the economy as a whole does have a fair bit of export sensitivity, and that could be problematic during a global downturn.
South Korea is another market that offers opportunity. Samsung Electronics (Korea: 005930, OTC: SSNLF) and Hyundai Motor (Korea: 005380, OTC: HYMTF) have become strong enough to practically dominate their industries. South Korea also has some very competitive and well-managed companies that are incredibly cash generative, but have yet to see their valuations rise to reflect their underlying fundamentals. Those stories are lost behind the excitement over the country's export competitiveness.
There's been a bifurcation in the market's opinion about whether to favor companies that produce impressive top-line growth, but whose cash flows are not nearly as strong, or companies that produce strong cash flows, but have more moderate growth. That's created a situation where investors interested in South Korea can still find defensive, undervalued names with attractive yields.
Thailand deserves attention too. We're reasonably positive about Thailand's political outlook, as well as the country's recovery after last year's floods. The economy seems to be picking up momentum after a difficult 2011, and we've been excited to see many Thai companies that had suffered serious setbacks regain lost ground. There's reason to be optimistic about Thailand in that context.
Mexico also has a robust economy. It does have linkages to Europe, and there has been concern about the narcotics wars there. Despite those issues, the economy has been surprisingly stable and productive. And there are Mexican companies that offer attractive dividend yields and have healthy, unlevered balance sheets.
Open to the public - No registration required
* Thursday, July 12 *
4:15pm Eastern / 1:15pm Pacific
Toll-free dial-in: 866-906-7447
Participant code: 5947350
See http://www.seafarerfunds.com/ for more details and to submit a question.
Slide deck for the conf call has been posted:
http://www.seafarerfunds.com/documents/misc/Seafarer - Conference Call Presentation - 2012-07-12.pdf