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Carmignac’s Xavier Hovasse: How upcoming elections could shape emerging markets
by Elsa Buchanan on Apr 02, 2014 at 07:00
Elections in India, Colombia and Brazil this year could change the way investors look at emerging markets, says Xavier Hovasse of Carmignac.
While the manager of the Carmignac Emerging Discovery fund explains he initially invested in Mexico because of hidden value in a number of sectors, he moved to an overweight not long after voters elected Enrique Peña Nieto as their new president in 2012.
With impending elections in Columbia and India, Hovasse hopes Colombian incumbent president Juan Manuel Santos and Narendra Modi, the prime ministerial candidate for India’s main opposition BJP party, will be voted in.
‘We think it is better to invest in countries in places where elections have happened already, such as Mexico, or where the most likely winner is investor-friendly, as is the case in Colombia and India,’ he said.
Although Colombia’s elections are not until May, he already favours retail banks on the back of extremely low credit ratios failing to top 35% of GDP, alongside infrastructure.
The latter is poised to do well after the state announced a $50 billion investment programme that includes road system enhancements, he said. Here he holds cement companies Cementos Argos and Cemex LatAm.
The fund also holds retail bank Banco Davivienda, Canada-listed Gran Sierra oil company and Almacenes Exito, the Colombian subsidiary of French retailer Casino.
‘The idea is that if there is a liquidity crunch and the markets close, those stocks with good cashflow generation don’t need the markets.’
An eye on India
In India, Hovasse is following similar themes to Colombia. He holds Shree Cements, low income mortgage provider LIC Housing and infrastructure company GMR Infrastructure.
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