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View the article online at http://citywire.co.uk/wealth-manager/article/a732473

Aberdeen's Kaloo says he was in ‘all the wrong countries' after mass outflows

by Eleanor Lawrie on Feb 06, 2014 at 07:32

The manager said Aberdeen had suffered because of its long term, bottom up style, as ‘all people are concerned about at the moment is what China does and what the US does’.

‘We are a bottom-up stock picking house and we think that is very rewarding because ultimately markets are about companies,’ he said.

‘But in the short-term, markets can forget about companies and that is the period we are going through at the moment.’

The manager argues there is a 'disconnect' whereby the best companies were operating in the toughest macro conditions and vice versa.

‘In this environment people are making snap judgements about good countries versus bad countries, not good companies versus bad companies, so there is a disconnect’

However, he remains upbeat about the long-term emerging market growth story. Although companies in emerging markets have been hit by a double whammy of low growth and rising input costs, which have reduced their profitability, Kaloo said they now trade at a significant discount to their developed peers and are applying self-help methods.

'Encouragingly the recent difficulties faced by emerging market companies will refocus the attention of management on margins and removing excess costs,' he said. 'Consequently, once the cyclical slowdown turns into an upturn, companies should report stronger topline growth as well as widening margins which will drive a strong earnings recovery.'

Within emerging markets, the manager is positive on Thailand where he says the economy is 'in quite a good shape' despite political volatility. He also expects that Brazil could surprise on the upside - depending on the results of its election. 

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How is regulation feeding the outsourcing trend?

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