Salient to Investors:
Anna Stupnytska at Goldman Sachs Asset Mgmt said:
- The growth market and the emerging market should be the main focus. Emerging markets are undervalued because investors are focused too much on the developed world. Investors are undervaluing the BRIC story which is still valid long-term.
- The rise of the consumer is the biggest investment story in emerging markets
- The growth cycle is picking up in many countries including China, Brazil, while the global cycle is turning – most of the growth will be driven by the global market.
- On a cyclically adjusted P/E ratio, Russia is over 50% undervalued, and consumer related sectors have been outpacing the commodity related sectors. Russia is one of the largest consumer and manufacturing markets and fast growing. Commodities is no longer driving Russia growth
- China, Brazil, Turkey are extremely undervalued.
- No longer expect a hard landing in China. Excited by quality of growth in China, faster growing retail sales shows consumers are taking a bigger role in the economy. Expect 7-8% growth going forward, driven by consumers. Chinese real estate is stabilizing and policies are controlling the bubble.
- Brazil inflation is a big issue but policies are in place to manage it
- India growth is impressive and more proactive than reactive.
- Emerging markets are well placed to tackle the bubble resulting from Quantative Easing.
- Better to buy sectors than indexes because the consumer sectors will benefit the most and because the rise in middle classes is not played out yet – one billion people will join the global middle class by 2025. Better to buy a combo of domestic companies and developed country exporters.