Mark Burgess, Columbia Threadneedle Investments’ CIO and global head of equities, told Fund Selector Asia he feels otherwise about the ASEAN region.
“While valuations in emerging markets are cheap, we are concerned that China will export deflation to its emerging market peers through currency devaluation. The lesson of the recent market volatility in emerging markets is that investors should not treat emerging markets as a homogenous bloc, especially so when commodity-exporting emerging economies have performed extremely poorly,” Burgess said.
“Our actively-managed emerging market equity portfolios are running higher-than-average cash positions, which has helped during the recent volatility. In emerging markets, we feel it is important to focus on self-help stories or those with a domestic consumer growth angle,” Burgess added.
From an asset allocation view, Burgess favours India while he is underweight Malaysia. Burgess noted that Columbia Threadneedle Investments does not invest in Vietnam.
Like several of his industry peers, Burgess is optimistic about Japan.
He noted that corporate Japan is highly insulated from the global turmoil and that Japanese equity valuations have cheapened meaningfully since the sell-off. In the case of the Eurozone, Burgess said that the region could experience some near-term rockiness, as emerging markets are an important destination for the European automobile and luxury goods industries.
“However, there has been a meaningful recovery in earnings for domestic European stocks and we are finding a range of opportunities here. Both Europe and Japan are set to benefit from the ongoing theme of monetary policy divergence, as quantitative easing is ongoing in both countries, which should support asset prices,” Burgess said.
In the case of the UK, Burgess finds value in alternatives. He said Columbia Threadneedle Investments is overweight on UK commercial property in its asset allocation portfolios.
“UK commercial property offers genuine diversification benefits as prices for commercial property tend to be driven by investor demand, rather than the short-term volatility in stock and bond markets. Moreover, it is a ‘hard’ asset, which is attractive at times of equity market stress,” Burgess said.
