United States – 104 medals in 2012
Like the historic dominance of the American Olympic team, Sanlam FOUR US Dividend Income Fund manager Adour Sarkissian expects US equities to continue showing strength as the market enters an eighth consecutive positive year of return.
“While US markets are in uncharted high territory, we are still able to find value in select areas. The dividend style significantly underperformed in 2015, with investors fearing interest rate hikes were on the horizon.
“Many strong companies were being sold off for the wrong reasons, allowing investors to take advantage of the attractive valuations. Following a long hibernation, the dividend style has come back into favour and is considerably leading the US market this year.”
China – 88 medals in 2012
The rise of the Chinese sporting superpower in recent decades echoes the rapid growth of the Chinese and Asian consumer, T. Rowe Price Asia Opportunities Equity Fund manager Eric Moffett explains.
“Real wage growth and improving standards of living are driving an exciting, broad-based shift in Asian consumer tastes and daily spending habits. One knock-on effect of this demand has been the sharp growth in e-commerce. The traditional economy is still under-developed, allowing new technologies to leapfrog years of normal change. Mobile Internet penetration in China, for example, is among the highest in the world, effectively opening up a world of consumer opportunities.
“Although global e-commerce sales continue to grow at a healthy pace, Asia’s growth eclipses the rest of the world. China’s market has been growing at a pace of more than 70% annually since 2009, and China officially overtook the US in 2013 as the world’s largest e-commerce market. Some estimates suggest by 2020 it may be as large as the US, Japan, UK, Germany, and France combined.”
Great Britain – 65 medals in 2012
The UK is not expected to score as many medals as it did on home soil four years ago, just as the UK economy is likely to post near-term lower growth in the aftermath of Brexit. While the Reit market was impacted by the referendum, Rogier Quirijns, the European real estate securities portfolio manager at Cohen & Steers, believes attractive opportunities remain.
“This sell off has created potential opportunities in Reits that have built up a strong long-term income and growth profile. Average leases in many Reits are in excess of 10 years and we do not believe the UK faces a severe recession or a ‘Lehman’ event – therefore cash flows should remain robust over the long term. We prefer Reits offering dividend yields of between 4% and 6%, with three-year growth rates of 10% to 30%. Many of these names should continue to deliver sustainable income and growth, despite the Brexit shock.”
Russia – 82 medals in 2012
While the 2016 Russian Olympic team is likely to be decimated due to the ongoing drug scandal, its economy appears to be slowly picking itself off the canvas, SWMC Emerging European Fund manager Lukas Schmitz discusses.
“The heavily commodity-dependent economy plunged into a recession last year due to the collapse in the oil price and the following devaluation of the rouble. With oil making a slight comeback and the Russian economy slowly diversifying, we can expect a return to GDP growth by 2017.
“We believe the best way of gaining exposure to the improving Russian economy is through the country’s largest banking and financial services company Sberbank, which has more than 130 million retail and 1.4 million corporate clients.”
