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JPM’s Titherington: US bonds are biggest threat to EM

by Eleanor Lawrie on Jul 14, 2014 at 11:01

JPM’s Titherington: US bonds are biggest  threat to EM

Richard Titherington (pictured), co-manager of the JPMorgan Emerging Markets Income fund, said the main threat to the region is another bout of turbulence from the US bond market.

‘It is the biggest single risk. So as long as that stays benign, that is a positive for emerging markets. But if we have turbulence that would be a negative,’ said Titherington, who is CIO and head of the JPMorgan emerging markets equity team based in London.

However, he added that the £131 million fund’s income focus could help shield its investors from the worst of any volatility, more so than its generic emerging market counterparts.

‘Obviously we would expect higher yielding stocks to be more stable, because they are more defensive and lower beta. I would generally see them outperforming,’ he added.

Like most of its emerging market peers, the fund has lost money over the year to the end of May, although less than the sector average. It lost 4.3% compared to a 5.8% loss for the MSCI emerging markets index.

‘It’s been a tough year. We have not had very much good news in emerging markets,’ Titherington said.

‘The trend has been against the asset class and I think that is why managers have suffered but the income fund has done better.’

Many emerging market currencies nosedived in 2013, as investors took refuge in the dollar when the announcement of asset price tapering in the US caused a liquidity crunch.

‘Last year, the major problem in emerging markets was currency rather than the equity component. It [the fund] does have exposure to certain currencies, so as long as the currency market is stable I would expect it to perform well,’ Titherington said.

Since the start of the year, emerging markets have rallied, outperforming their developed peers and the manager said he is now seeing renewed enthusiasm for the asset class.

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