F&C reveals investment favourites
30 June 2008

Written by Harriet Wigmore

F&C Investments, an investor in emerging markets, has recently announced that at country level its emerging equities team favours Russia, the United Emirates and Brazil.

Despite concerns from many about Russia’s higher than expected rates of inflation, F&C are optimistic about the new Russian president, Dimitri Medveydev, and his impact on the corporate sector, predicting “a reduction in taxes and less state interference”. This, combined with the fact that Russia is continuing to benefit from booming oil prices, earnings growth from Russian corporates and attractive valuations, has meant that F&C has made it clear that they are strongly overweight Russia.

The United Arab Emirates are favoured by the organisation for similar reasons with high oil and gas prices creating a huge account surplus, the resulting financial flexibility being used by the government to develop its financial and tourism industries. Their reasoning behind their position on Brazil, despite being cautious about most other Latin American markets (with a current underweight to Argentina, Chile and Mexico) is simple - Brazil’s economy continues to flourish and is expected to grow by a further five per cent this year. Other overweight markets include India, Taiwan, Thailand, Israel, Peru and Columbia.

However, the F&C team is less optimistic about the Chinese market due to a risk in earnings disappointments in 2008 following rising input costs and increased price controls. Nevertheless it is still thought that the economy could produce double-digit growth over the next year as the Chinese authorities have both the will and the flexibility to deal with rising inflation.

Other underweight countries include Korea and Malaysia. Despite this, Jeff Chowdry, head of emerging equities, concluded that “even against a back-drop of a global slow-down, growth rates in a number of emerging countries are still expected to be well ahead of those in mature western countries this year”.