Global Investing

Braving emerging stocks again

It’s a brave investor who will venture into emerging markets these days, let alone start a new fund. Data from Thomson Reuters company Lipper shows declining appetite for new emerging market funds – while almost 200 emerging debt and equity funds were launched in Europe back in 2011, the tally so far  this year is just 10.

But Shaw Wagener, a portfolio manager at U.S. investor American Funds has gone against the trend, launching an emerging growth and income fund earlier this month.

It’s a great time to launch a fund if you have a long-term focus in mind. Emerging markets trailed DM in terms of performance for a while, peaking at end of 2010 so we are 3-plus years into a down market and period of significant underperformance.

He may be onto something. Some analysts have tentatively started advising clients to start dipping their toes back into water, given how cheap emerging market valuations are. Societe Generale for instance which has been negative on emerging equities for 3 years, said in a note that the sector had gone from being “priced for perfection to deep value”.

Emerging equities trade around 10 times forward earnings, compared to 14 for their developed counterparts and down from 13 times back in 2010.  Check out this graphic by @ReutersFlasseur: http://link.reuters.com/rut87v

Three snapshots for Wednesday

On Friday 283 companies in the S&P 500 had a dividend yield higher than the 10-year Treasury yield, at yesterday’s close this had fallen to 266 but remains very high compared to the last 5-years.

Italian consumer morale plunged to its lowest level on record in May as Italians’ pessimism over the state of the economy plumbed new depths.

Germany set a zero coupon on its new Schatz, the first time it has done so on debt of such maturity. The bid to cover ratio for the new bond at the auction was 1.7, compared with 1.8 at a sale of two-year debt on April 18.

Good-bye babyboomers, good-buy Generation Y?

London’s premier department store Selfridges has already opened a Christmas shop with festive decorations and accessories (Christmas comes 141 days early), so it is no surprise that some fund managers are already looking ahead for next year onwards.

David Miller, head of alternative investment at Cheviot Asset Management, thinks investment in the period 2010-2012 will be driven by the impact of demographic trends, such as Generation Y — those born since 1978, all of whom grew up with the Internet.

However, as far as investment markets are concerned Baby Boomers (1946-1964) are still in the driving seat both as spenders and savers.