An investor shares his views on investing in emerging markets
Emerging markets have made headlines this year, with their growing economies, populations and consumer demand all attracting investors’ attention — but not all emerging markets are created equal. China in particular has caused concern, due to uncertainty about how its economy will perform in the future. George Boubouras, managing director of research, investments and consulting at Melbourne-based K2 Asset Management, shared his views on China — and elsewhere — with CNBC’s “Street Signs Asia.” “The Chinese economy as a whole has some opportunities. But when you break it all down, there are a lot of complexities and issues to work through,” Boubouras said on September 2. As a result, he said, many Western fund managers are reluctant to take large positions in the country. China’s GDP growth came in at 4.7% year-on-year, missing estimates of 5.1%, and retail sales also disappointed. As well as domestic concerns, trade tensions between the country and the EU and the US are weighing on investor sentiment. The MSCI China Index — which includes 655 large- and mid-cap stocks in the country — is up about 2.5% year-to-date, compared with a 7.25% gain for the MSCI World Emerging Market Index. Boubouras said the solution to China’s growth recovery depends on two factors: stimulating domestic demand and expanding national accounts to support the economy and businesses. “That will help turn around some of the sentiment at the consumer-business level,” he said. Boubouras said he has a “tactical and aggressive bias” toward China and is playing it through “exporters to China whose earnings are in developed countries.” Other emerging markets Boubouras is also bearish on emerging markets overall, but sees opportunities in Southeast Asia, India and Greece. Referring to India, he said it looks like the “place to be” right now, given its “solid opportunity network.” “It’s a little bit of a mix there, but there’s a big barrier to investing in India … But it’s not going to replicate or replace what the Chinese stock market has been for Western investors for decades.” The BSE Sensex index—which represents the country’s 30 largest and most-traded companies on the Bombay Stock Exchange—is up about 14% year-to-date, while the benchmark Nifty 50 is up about 15% as of Sept. 5. Meanwhile, on Greece, Boubouras said the country’s “economy has turned itself around,” but needs to boost its sectors beyond agriculture and tourism to grow further. The MSCI Greece index, which includes the country’s top large- and mid-cap stocks, is up nearly 13.5% year-to-date. Greece’s credit rating was upgraded to investment grade by S&P and Fitch Ratings last year, while Moody’s upgraded Greece one notch below investment grade. Going forward, Boubouras has an overriding call for developed markets and investment grade credit. He also likes diversified growth markets like REITs and commodities.
