Jim Armitage: New players emerging in the emerging markets

Global outlook

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The Independent Online

Mr Mittal seems, on the face of it, a lot more confident in the outlook for China and other far-flung territories than the veteran emerging markets fund manager Mark Mobius. Mr Mobius, who runs a $50bn fund investing in the emerging markets for the fund manager Templeton, is convinced that valuations on companies in many of these regions remain too high. In his words: “You can expect a lot more selling.”

And this from a 77-year-old who’s been investing there for the past four decades.

He reckons the 11 per cent rout in the share prices of emerging markets since October is not yet enough, even after the past two weeks in which more than  $12bn was pulled out of funds investing in the developing world. He’s particularly sceptical about the bigger countries. We can assume he’s talking here about the likes of  India and Turkey, where weak currencies are triggering central bank interest rate rises, and China, where growth is falling.

Mr Mobius has not taken his money off the table altogether, though. He’s just being a touch more selective in his adventures. Cue investments in companies in Kenya, Nigeria and other African countries less affected by the vagaries of the US Federal Reserve, whose actions have such a dramatic impact on bigger economies. These are known in the trade as “frontier markets” and include, in Morgan Stanley’s definition, places such as Kazakhstan and Slovenia in Europe, Jamaica and Argentina in the Americas, and Bahrain, Kuwait and Sri Lanka in the Middle East and Asia.

So far, the figures seem to back him up. Bloomberg reports that profits among companies in Morgan Stanley’s index of frontier markets are at five-year highs. Last year, their share prices outpaced the larger emerging markets by 26 per cent.

Bulgaria, Botswana, Bangladesh, your time has come.