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Explore the potential of emerging markets with a deep dive into investment strategies and market analysis by Rajiv Jain, a portfolio manager at Vontobel Asset Management. Discover key data highlighting the productivity, GDP growth, and total market returns in China, India, and South Korea. Uncover the impact of valuations and earnings growth on market performance. Gain insights on leading companies like Grupo Modelo in Mexico. Assess the growth vs. value dynamics in the investment process and performance of Vontobel funds in the emerging markets and Far East regions. Stay informed about sector winners, trends, and conclusions shaping the investment landscape.
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Vontobel Asset Management& Investment Funds Emerging Markets: Good Buy or Goodbye? Referent: Rajiv Jain, Portfolio Manager International Managing Director, Vontobel Asset Management, Inc., New York
Emerging Markets So far on passing lane Source: HANDELSBLATT, 11/11/2005, p. 39
Solid macro data as safeguard against volatility? Excerpted from: “The Continuing Case for Emerging Markets, Revisited” Everest Capital, February 2005
Leading productivity Emerging Markets offer some of the most productive corporations on the basis of RoE Source: Bernstein Research and Everest Capital, February 2005
Low CorrelationGood Diversification Source: Bloomberg, Monthly Data for MSCI and IFC Indices, Gross Total Returns in USD 12/31/98 - 12/31/2004
ChinaReal GDP Growth vs. Total Return of the Market The real GDP growth compounded 9% in China relative to a stock market return of -2%!! Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) from FactSet Aggregates.
IndiaReal GDP Growth vs. Total Return of the Market The real GDP growth compounded 6% relative to a USD return of 8%. Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) from FactSet Aggregates.
South KoreaReal GDP Growth vs. Total Return of the Market The real GDP growth compounded 7% relative to a USD return of 3%. Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) from FactSet Aggregates.
ChinaValuations and Earnings growth matter Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.
IndiaValuations and Earnings growth matter Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.
South KoreaValuations and Earnings growth matter Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.
Market ValuationsDividend Yields Over Last 20 Years 5.00 Asia/Pacific ex Japan Japan World 4.50 4.00 3.50 3.00 2.50 2.00 1.50 1.00 0.50 0.00 Nov-85 Nov-86 Nov-87 Nov-88 Nov-89 Nov-90 Nov-91 Nov-92 Nov-93 Nov-94 Nov-95 Nov-96 Nov-97 Nov-98 Nov-99 Nov-00 Nov-01 Nov-02 Nov-03 Nov-04 Source: FactSet Aggregates
Unilever IndonesiaEPS Growth Positively Correlates with Price Performance Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.
Lotte ConfectionaryEPS Growth Positively Correlates with Price Performance Sources: Real GDP Growth from IMF: Directions of Trade, years before 1999 and World Bank Data, years 2000-2004. Total Return Index (USD) and valuation from FactSet Aggregates.
Hero Honda MotorsEPS Growth Positively Correlates with Price Performance Source: FactSet; as of Nov. 30, 2005.
Grupo ModeloMexico • Founded in 1925, Grupo Modelo is the leader in the production, distribution, and sale of beer in Mexico (over 60% market share). • Brands: Corona, Negra Modelo, Pacifico and more. • Exclusive Mexican importer and distributor of Anheuser-Busch beers (Budweiser, Bud Light). • Anheuser-Busch owns about 50% of Grupo Modelo. • Sales growth of 8% annually over last 10 years. • Operating margin >20%, ROE >10%; No long term debt. • Dividend yield of 3%. • Forward P/E of 16x. • Market Cap: $US 10.5 bn. As of 9/26/05
Growth vs. ValueOur Definition Classical Growth = High Prices, High Earning Growth "Stars" High Earnings Growth, Low Prices "Looser" High Prices, Low Earnings Growth Classical Value = Low Prices, Low Earnings Growth
Vontobel Fund - Emerging Markets EquityPerformance as of 12/31/2005 Rating as of 12/31/2005
Emerging Markets EquityUp/Down Market Analysis, ending December 2005
Equity Funds Emerging Markets global Return-Risk-Spread sheet last 3 years
Vontobel Fund - Far East EquityPerformance as of 12/30/2005 Rating as of 12/31/2005
Far East EquityUp/Down Market Analysis, ending December 2005
Equity Funds Far East ex Japan Return-Risk-Spread sheet last 3 years
OutlookDon’t expect to see a break in flows until bad things happen
Sector Winners: Energy, Materials and TechnologyTrend going on?
Conclusions Positive: • Still attractive valuations absolutely, historically and relatively • High productivity • Solid macro data • Asia: More and more independent of US economy • Low Correlation - Good Diversification Negative: • Negative growth surprise • Exogenous shock (bird flu, terrorism) • Optimism relative to Emerging Markets is probably peaking • Earnings and productivity at record levels • High oil price and rising interest rates EM are an essential element of a Global Equity Portfolio Outperformance by Buying Quality in Emerging Markets!
