[GRTV] Emerging markets key to long-term investment success

Investors may short-change themselves over the long-term if they do not have the right sort of exposure to emerging markets, one fund manager says.

Aleksey Mironenko, partner and chief distribution officer at Premia Partners, said investors still had limited options to invest in growth economies such as Southeast Asia, India and China.

But he said they would be important parts of the portfolio for those planning for the future.

“If you're trying to save for the next 20-30 years, you want to invest in places that are growing 5% a year, not 2% a year, but it's much harder to do that,” he said.

Part of that was the impression that investors had of markets not living up to their hype, Mironenko said. “Now, the problem is, a lot of people have been saying this for a while, ‘EM's going to outperform, EM's going to outperform’, and it hasn't.”

But he said the opportunities for growth to outpace that of other markets were evident.

“If you think about where we are today, the US is at a forward PE, priced equity, of 19. Asia is at 13. It's much cheaper. You're paying less for more growth. We like that equation. That gap, 19 versus 13, that's the biggest in 10 years that we've had.”

It would require a different way of thinking, he said.

“Most of us, when we think about EM, we think about low-cost export manufacturers. We think about oil companies. Well, these are the things that are doing worse and worse. As we transition to sustainable energy, oil companies – which are a lot of EM firms – are doing worse.
“But if you look at the structural story in EM, EM consumers are embracing technology much faster than developed market consumers. China is greying much faster than any other country in history.

“There are these interesting growth stories that are performing incredibly well, but most investors are under-invested in them because they own Facebook, Amazon, Alibaba, Tencent. They don't own Chinese pharmaceutical companies. They don't own the largest tech conglomerates in Korea. They might own Samsung, but they don't own the local companies that are serving local consumers.”

Mironenko expected markets to shake off concerns about coronavirus.

“Markets don't care about human suffering, unfortunately, they only care about forward projections, and the reality is that in situations like this, governments step in, they provide credit lines, they extend deadlines, and there will be pent-up demand.

“So we expect, clearly, a Q1 dip in earnings of Chinese companies, if not global companies, and in GDP numbers, without question. Q2 will be less bad. Q3 will probably be great, and maybe earlier, maybe later. We're not scientists, so that's for someone else to judge, but it's very clear that this virus, while having a very fast transmission, seems to have a much lower mortality rate than some of the past epidemics we've had.”

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Full transcript of the interview available here.