Emerging Markets in the Sun

According to the FT, emerging markets have attracted over $1 billion a day this week in new money – and about $800 million of this is heading to China. The general expectation is that emerging markets will grow more than developed markets this year.

For those who aren’t quite sure, emerging markets include countries as India, China, Taiwan and Brazil.

I’ve held the JP Morgan Emerging Markets Investment Trust for years – it’s a perennially well-respected trust and has roared up by 27% in the last three months, after a punishing couple of years. The largest holding in this is the Taiwan Semiconductor Manufacturing Company, followed by firms such as China’s Tencent, India’s Tata and Brazil’s Mercado Libre.

Let’s take a detour to India

Tata is one of the most interesting companies in the world. Founded in 1868 by 29-year-old Jamsetji Nusserwanji Tata, they built mills, then hotels and were probably the earliest advocates of employee wellbeing, practising the philanthropy which many of the Parsi religion are known for.

Jamsetji built the Taj Hotel (now sadly famous for the terrorist attack in 2008) because ‘the Britishers’ refused him entry to the most opulent hotels of the time, which were whites-only. So he built a better one!

You cannot step into modern day India without seeing Tata – whether it’s a massive truck bearing down on you – “Horn, please!” – a watch on your wrist, salt on your bhaji, chemicals in the factory you drive past, or the hotel you go to sleep in. Today, Tata Consultancy is 4.8% of the JPM Investment Trust.

The potential of India has always fascinated me. About 15 years ago, I emailed the MD of Tata Asset Management from a tiny internet café in the slum area of Pune I was working in (that’s another story). From a Hotmail account. Imagine my surprise when he replied!

The next week I was in his office in Mumbai, in a hastily bought ill-fitting suit which was 3 inches too short, and the following month I was doing some work for them. I introduced them to fund managers and connections in London. When UK fund managers launched a fund 15 years ago, they might typically have gone to about 10 or 12 towns across England, Scotland and Wales. When Tata launched a fund, they did roadshows in over 250 towns! Everything is monumentally bigger.

Bringing it back to investing, you can see why some wonder if these regions will be to the next decade what tech stocks have been to the last one. I’m going to put this question to Ben Rogoff, super experienced manager of the Polar Capital Investment Trust, when I talk to him about the outlook for tech stocks in our webinar on the 21st of February at 6pm. Sign up if you’re interested to hear from Ben.

Just before you all get too excited about emerging markets...

Some analysts think that much of the uplift is now priced in. And of course there are significant risks in these regions – debt, Covid hangovers, demographics... They are volatile and governance is not always what it might be. So do be aware of the risks.

Investment Trusts are widely thought to be good ways to access these less liquid emerging markets. If you’re interested to learn more about this, and Investment Trusts in general, you can sign up for our new Investment Trust hub – coming soon. There’s a sneak preview we’ve put live today with three articles containing some expert suggestions for recovery, income and recession scenarios – including a pick on China! It’s an interesting read.

And finally – one for women who are helping older parents manage money, tax, care costs and more – we have a few spots left in our small online workshop' led by adviser Rachel Efetha, next Wed at midday. 'Planning for your Parents' – details here.

Have a good weekend everyone. I think I am going to have to give in to pressure and start watching Happy Valley about 8 years later than everyone else. But I’m not quite sure I can be bothered... #popularculturetrailblazer

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