7 wealth managers' top Commonwealth countries to invest in
Ana Armstrong, CEO, Armstrong Investments
'From early 2013 we have been bullish on Frontier and Smaller Emerging Markets. For the first time our models indicate that this is a structural macro theme based on underlying fundamentalist more than just something technical. These markets are at a similar place where Emerging Markets have been 20 years ago. They have an experience of the EM and a lower inflationary environment working to their advantage. They will go through the same changes in life style and spending. These markets are focused on internal demand and exhibit low correlation with Emerging Markets. Demand for cars will further boast demand for platinum. South Africa produces 70% of platinum and demand already outstrips supply. Robust growth of China’s GDP will increase demand for platinum.
'In Africa Kenya with its well diversified economy between manufacturing and services is an important player. Investors’ confidence increased after recent elections.
'However, investors are put off by an increasing political risk. In the longer term, Pakistan is also an overweight where we see good momentum. This is also due to developments in Iran and a seemingly better relationship with India’s new government. Investors confidence increased after recent elections. As valuations are becoming expensive, stock selection is increasingly important.'
Tom Becket, CIO, Psigma Investment Management
'Australia used to be a place where we just dumped our undesirable citizens (and the Irish). Then it became somewhere we got routinely suffed in Sport (we now do that everywhere). Then we got to enjoy the high-brow shows such as Neighbours, Home and Away and the Flying Doctors. But now it has a fourth use as one of the world's primary sources of natural resources. For the contrarians amongst us there is a potentially attractive opportunity in the Australian miners. Whilst resources' prices will fluctuate in unison with sentiment towards China (currently overly bearish), mining companies such as Rio Tinto and BHP Billiton have swept out the rubbish management who were wasting all their hard earned cash, streamlined their operations and found a new devotion to shareholder returns. With valuations relatively cheap and dividends attractive, the recent improvement in the fortunes of mining shares can continue. Australia will thrash us in next year's Ashes as well.'
Jordan Sriharan, Investment Analyst, Broadstone
'For many years India has encapsulated the stereotype of the “sleeping giant”. A large and well educated population, a democratic electoral system and impressive infrastructure; the potential for consistently strong economic growth is vast. Yet successive governments have failed their voters with loose policies that stifled investment, incited corruption and exacerbated the wealth gap.
'It was always going to require a change of approach from a new government for financial markets to believe that India could deliver on its potential growth. In late May the BJP party lead by Narendra Modi was elected with a manifesto built around restoring confidence in the economy. Decisive and swift action since has carried the optimism that swept Indian asset markets in the election run-up; the Indian Rupee has strengthened, yields on government bonds have fallen and equity markets have risen. Despite the rally so far we continue to maintain a positive view on Indian assets as structural changes and economic reforms are implemented.
'A view reinforced by the government’s first budget where, amongst other announcements, the preference for boosting FDI, reforming the tax system and easing labour laws should foster a more free-market economy.'
John Greenwood, CEO, Creechurch Capital
'The Commonwealth is a hugely diverse group of countries spanning every continent. Total nominal GDP derived from the Commonwealth is expected to be around $10.450 trillion in 2014 (Commonwealth estimate), placing it second place in world GDP rankings, behind the US on top spot and just ahead of China taking bronze in third place.
'For me, Africa presents an interesting investment case. Nigeria has the 7th largest population in the world and the 30th largest GDP, according to the IMF (2013) and was tipped earlier this year as a rising power as the ‘N’ in Jim O Neill’s MINT economies. More pertinently, it also has a young population who are keen to adopt the Western way of life. This demographic, combined with a lack of financial institutions found outside major cities, has seen the demand in mobile banking surge. As such, both Nigerian finance and telecoms are tipped for solid performance in the near future.'
Chris Mayo, Investment Director, Wellian Investment Solutions
'With India’s recent election results meaning a change in government and a rebounding economy, the issues that have held back corporate India appear to be turning. India is home to a number of high performing companies with a strong competitive advantage, but many of these businesses have been severely inhibited over the past few years by a combination of domestic politics and a weak Indian economy. Economic improvements mean India looks likely to be an increasingly exciting and rewarding place to invest in over the coming years, although changes are still needed.'
Lale Can, Fund researcher and analyst, Ashcourt Rowan
'I consider the Australian bond market particularly interesting. In my opinion, Australia will be one of the last developed markets to hike interest rates mainly due to the structurally stable unemployment at a higher rate than the Reserve Bank of Australia would like to achieve and the relatively bearish outlook on commodity prices. Timing-wise, inflation in Australia has also peaked recently as the effects of carbon and tobacco taxes will disappear in the coming months.'
Richard Philbin, CIO, Harwood Capital
'There are 53 countries in the Commonwealth of Nations; they represent every continent and boast a population of 2.3bn; roughly 1/3 of the population of the world, but many of these countries do not actually possess a stock market so what starts off as an interesting investment idea soon becomes a difficult proposition!
'Given a 10 year time Horizon, my eye would be caught by India because of recent political change; a huge investment universe; and a billion consumers - but be mindful of corruption!
Many Commonwealth countries are frontier markets – especially the African nations. They come with high political risk and low liquidity and can quickly lose investors lots of money.
'Correspondingly, they also possess the potential for a high potential return. Tread carefully.'