Latest / Bloomberg Intelligence / Thornburg's Wilson on Opportunities in Emerging Markets (Audio)

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Thornburg's Wilson on Opportunities in Emerging Markets (Audio) · Bloomberg Intelligence

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  Speaker 1: Global business news twenty four hours a day. If Bloomberg
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  Speaker 1: This is a Bloomberg Business flash. Broom, Bloomberg World Handquarters.
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  Speaker 1: I'm Charlie Pellett's stock's edge higher, holding close to our
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  Speaker 1: one percent. I'm Charlie Pellett. That's a Bloomberg business flash.
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  Speaker 1: You're listening to taking Stock with Kathleen Hays and Pim
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  Speaker 1: Box on Bloomberg Radio. Back in July, a black Rock
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  Speaker 1: money manager Sergio trego Pas, ahead of emerging market debt
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  Speaker 1: at black Rock, said in a Bloomberg television interview well
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  Speaker 1: that there was a great migration that investors should pour
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  Speaker 1: into emerging market debt. Well, now the advice is be selected.
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  Speaker 1: Just yesterday he said that investors need to exercise caution
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  Speaker 1: or face being caught in a sell off. Is sentiment
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  Speaker 1: suddenly shifts Here to tell us more is Charlie Wilson.
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  Speaker 1: He is portfolio manager and Managing director and co manager
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  Speaker 1: of the Developing World Fund, and the Developing World Fund
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  Speaker 1: has uh produced a return of a little bit more
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  Speaker 1: than twelve percent so far this year, and he joins
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  Speaker 1: us in our studio. Charlie, thanks very much for being here,
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  Speaker 1: Thanks for having me. What is the mandate of the
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  Speaker 1: Developing World Fund? Our focus is to provide our investors
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  Speaker 1: opportunities and emerging markets through both companies that are dom
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  Speaker 1: missiled and emerging markets, but also maybe dom missiled elsewhere
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  Speaker 1: such as in the US or Europe. And so you're
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  Speaker 1: focused on equities, which is some very different from looking
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  Speaker 1: at emerging market debt and very important that your view
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  Speaker 1: is that now at a time when the macro, what's
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  Speaker 1: the FED going to do? In fact, what's the Bank
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  Speaker 1: of Japan? But typically the Fed, Fed's gonna high grate
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  Speaker 1: some eagin markets sell off, They're not going to high
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  Speaker 1: create emerging markets do better. But you're saying, okay, let's
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  Speaker 1: look at domestic reform agendas, find specific stories. Mexico is
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  Speaker 1: one of your examples. Why Yeah, Well, if you look
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  Speaker 1: since the beginning of the year, emerging markets equities are
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  Speaker 1: up over and from the bottom in January nearly. So
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  Speaker 1: at this point we need to see underlying earnings flow through,
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  Speaker 1: and so we're trying to be UH, we're trying to
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  Speaker 1: focus on areas where we're seeing positive developments. One of
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  Speaker 1: the areas where we're seeing that are through the stories
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  Speaker 1: driven by reform agendas. For example, in Mexico, we've seen
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  Speaker 1: h subdued inflation over the last couple of years after
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  Speaker 1: we've seen reform around H the telecoma industry pricing, for example,
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  Speaker 1: which has helped us for real income growth and drive earnings. UH.
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  Speaker 1: Surprises in the consumer sector, particularly out of companies like
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  Speaker 1: Walmex and Oxo. Tell us about China because I noticed
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  Speaker 1: that two of your large holdings, one is a life
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  Speaker 1: insurance company in China and the other is the Shanghai
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  Speaker 1: International Airport. How did you find these two particular stocks. Yeah, well,
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  Speaker 1: those are a part of two themes that we really like.
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  Speaker 1: One is increasing healthcare penetration throughout Asia. We have healthcare
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  Speaker 1: investments both in the hospital side as well as a
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  Speaker 1: life insurance life insurance side in multiple countries. And then
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  Speaker 1: the other thing is increased outbound travel from China to
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  Speaker 1: other countries. UH. We've invested in that theme through not
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  Speaker 1: only directly through the airports, but also through tourists driven
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  Speaker 1: themes like Korean cosmetics companies as well. So how do
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  Speaker 1: you go about what's your methodology when you're looking at
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  Speaker 1: companies our countries, emerging market companies, and then do you
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  Speaker 1: start with who's got the best domestic reforma genda? Or
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  Speaker 1: do you go in and say, look, I think maybe
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  Speaker 1: I liked this company and it's so and find out
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  Speaker 1: what supports it. Yeah, you know, obviously it takes a
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  Speaker 1: little bit of both, but primarily we're focused on company
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  Speaker 1: fundamental so we're bottom up focused investors. What we try
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  Speaker 1: to do is look for opportunities that have a multi
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  Speaker 1: year angle to them, and right now, after quite a run,
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  Speaker 1: we're having to be a little bit more selective, and
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  Speaker 1: as I mentioned, we are finding opportunities with those reform
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  Speaker 1: driven stories. What I think is, what I think is
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  Speaker 1: interesting is that you've been given an opportunity some some
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  Speaker 1: of these countries have been given an opportunity where they've
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  Speaker 1: been forced to really address their fiscal deficits, which is
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  Speaker 1: leading to lower inflation over the longer term, and it's
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  Speaker 1: creating opportunities for us that are fundamentally driven investors to
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  Speaker 1: find good long term stories. Well, one of your stories
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  Speaker 1: is Hong Kong Exchanges and clearing investing in overseas exchanges. Uh,
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  Speaker 1: what was the uh impetus to make that investment. Yeah,
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  Speaker 1: we really like a story companies that have dominant market positions,
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  Speaker 1: and obviously Hong Kong Exchange is an important financial center
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  Speaker 1: for the Chinese government, especially as they try to internationalize
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  Speaker 1: their capital markets. We think that a share inclusion ultimately
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  Speaker 1: will drive more international investor interest and bring capital flow
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  Speaker 1: via Hong Kong to the mainland. And uh, the Chinese
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  Speaker 1: government will see Hong Kong Exchanges an important partner in
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  Speaker 1: that process. China G twenty just met there. There's so
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  Speaker 1: much there's so many issues around each China domestic reform agenda.
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  Speaker 1: There's pollution they're trying to clean up, the big shift
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  Speaker 1: of course from export like growth of consumer driven and
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  Speaker 1: all the complications and opportunities there. What's your story for China, Well,
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  Speaker 1: just on the G twenty specifically, I feel like that
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  Speaker 1: you know, as you get with most of these events,
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  Speaker 1: there's a there was a lot of hype, not necessarily
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  Speaker 1: a lot of substance immediately. But one thing that I
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  Speaker 1: do think that it highlighted was the fact that we
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  Speaker 1: have slow economic growth globally. We're seeing an increase in
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  Speaker 1: protectionism or focus on policies designed to to provide trade barriers,
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  Speaker 1: and I think that the G twenty was right to
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  Speaker 1: address some of those issues. Um. I think China in
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  Speaker 1: particular has suffered from slowing growth due to the fact
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  Speaker 1: that the global export demand on global trade demand has
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  Speaker 1: been weaker than last decade, and that's hurt their export economy.
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  Speaker 1: Now you're mentioning cosmetics, and I know that that had
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  Speaker 1: to do with Korea and the company is called a
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  Speaker 1: more Pacific correct. Yes, yeah, how did you stumble upon this?
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  Speaker 1: I mean, where did you find this? Well? Frankly, um,
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  Speaker 1: my wife was probably the leader in this research. Um,
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  Speaker 1: you know she she I was aware of the company
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  Speaker 1: as a Korean blue chef, but um, but she actually
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  Speaker 1: highlighted the quality of the products and helped me to
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  Speaker 1: understand the international opportunity. And that's for a more a
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  Speaker 1: over the next couple of years, it's less about Korea,
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  Speaker 1: but the fact that it's becoming a global brand. And
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  Speaker 1: the most recent quarter a moore a sales in China
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  Speaker 1: were up sixty year over year, and they're starting to
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  Speaker 1: see an acceleration and growth in other markets like the US.
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  Speaker 1: Just a quick comment on India. Who do you like
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  Speaker 1: there and why? Well? I think UH in India that's
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  Speaker 1: one of the most under penetrated UH markets from a
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  Speaker 1: data consumption perspective, and so while the landscape around the
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  Speaker 1: data infrastructure on at the telecom side is still maybe
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  Speaker 1: a little bit uncertain UM, one of the companies that
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  Speaker 1: we've liked for a while and help for a while
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  Speaker 1: is Z Entertainment, which is benefiting from the proliferation of
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  Speaker 1: content availability. All right, Charlie Wilson, you have to come
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  Speaker 1: back soon. Lots of good ideas based on how governments
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  Speaker 1: are changing their economists and their business models. Supportfolio Manager
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  Speaker 1: Managing Director co manager of the Developing World Fund at
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  Speaker 1: Thornburg Investment Management. I'm Kathleen Hayes along with pim Fox.
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