Portfolio manager, Vontobel
First and foremost, we are active, bottom-up, long-term investors. We are aware of trends, but when investing, we don’t follow trends and wouldn’t deviate from our investment process to follow them.
The key driver of our performance is stock selection. We like companies that are leading in terms of return on invested capital and industry positioning, trading at a discount to their fair value, and effectively addressing environmental, social and governance issues.
Geographically, we overweight Asia, as we see more potential in
companies located in that region — for example, in China. The country has quite a broad market, and the profitability of selected companies is good if you leave out traditional industrials and commodity-related sectors.
Other countries we favour are South Korea, South Africa and Taiwan.
In emerging markets, the recent correction has created attractive
valuations. Based on a Shiller P/E ratio, the discount of emerging markets versus developed markets has grown over the past two months to more than 36%, approaching the multi-year low of 40% reached early 2016 (see chart below).
Such low valuations may be flashing a rebound signal.
At least this is what history tells us – the bounce-back of emerging markets equities at the beginning of 2016 is a case in point.
In addition, one should not forget that long term growth prospects for emerging markets remain very attractive when compared to developed markets.