China and India long-term bets
CHINA is an exciting long-term emerging market investment bet, says Dudley Howard, managing director of Guinness Flight Asia.
'We like both China and India for the long-term,' he said.
There had been worldwide euphoria about China since a number of China funds were launched, and the country's huge corporations attracted investor interest.
'All that has been dissipated by what has been a bad [company] reporting season,' Mr Howard said.
'But it has now been proven, I think, that, just because China's corporations are big, it does not necessarily mean that they will be profitable.' Mr Howard said the hoped-for surge in profitability had not happened according to expectations.
'But it is clear now that, with prices having fallen by more than half in many cases, and with China having gone through a period of overheating which it has been trying to cool down, it is looking attractive,' he said.
'For the past 18 months, China has been trying to rein things back and people have been worried that if they were to invest in Hong Kong or in China they would be hit again by a hard landing. Now it's been a soft landing, which one should take heart from. It begins to look relatively attractive for the long-term investor.' Mr Howard said nearly 47 per cent of Guinness Flight's Global Emerging Markets Fund was invested in Asia.
Of that, 27 per cent was invested in Southeast Asia, 11 per cent in Northeast Asia, nine per cent in India and two per cent in Sri Lanka.
'At Guinness Flight, we classify emerging markets into three categories: embryonic, industrialising and approaching maturity,' he said.
On a global basis it classified China, Sri Lanka, Colombia, Peru and most of Eastern Europe as embryonic emerging markets.
Argentina, Brazil, Chile, Portugal, Turkey, Indonesia, India, the Philippines and Thailand were classified as industrialising markets.
Markets approaching maturity were those in South Korea, Taiwan, Malaysia, Mexico, Israel and South Africa.
Mr Howard said South Africa and Israel were two interesting emerging markets.
'In South Africa, you have many well-established companies, some more than 100 years old, but their shares have not been available,' he said.
'Now there has been an utter sea-change in South Africa in terms of the political situation. Yet the risk factor is high.' He said Israel was a first-world country with a strong hi-tech dimension, making it an excellent prospect for companies wishing to establish there.