Wealth Manager - the site for professional investment managers

Register for full access to Citywire’s Fund Manager database, news and analysis. Registration is free and only takes a minute.

Carmignac’s Xavier Hovasse: How upcoming elections could shape emerging markets

Carmignac’s Xavier Hovasse: How upcoming elections could shape emerging markets

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.

While the currency situation will depend on the election, Hovasse explains Modi’s victory ‘could be very good’ for foreign direct investments’.

He also has a large overweight in the Philippines versus the benchmark, where he sees ‘good growth prospects’.

‘This is a country that has support from remittances of workers abroad who usually work in hard currency countries. The money sent back home means prospects for payment balance is good. This also means prospects for currency are good.’

However, he is negative on Brazil, and says a defeat by incumbent president Dilma Rousseff is ‘the only way out’. ‘Brazil could be rerated if she lost, and business confidence could shoot up,’ he added.

Over the last 12 months, the fund has posted a 9.27% loss versus a 12.6% fall by the MSCI Emerging Market Small and Mid-cap benchmark. Over three years, it was down 5.53%, compared to the benchmark’s 5.75% fall, according to Lipper.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.
Citywire TV
Play Investment Pulse: the highs and lows of 2014

Investment Pulse: the highs and lows of 2014

This week's Investment Pulse looks back at some of the biggest stories of the year as well as looking forward to 2015.

Play Inside ETFs: Why the US bull-run still has legs

Inside ETFs: Why the US bull-run still has legs

Global equities suffered a sharp sell-off in the third quarter but exchange traded fund investors are continuing to back the US to outperform in 2015

Play Paul Niven: I won't rip up the Foreign & Colonial Trust history book

Paul Niven: I won't rip up the Foreign & Colonial Trust history book

The newly appointed manager of the Foreign & Colonial trust talks about his plans for UK's oldest investment company.

Your Business: Cover Star Club

Manchester wealth firm hires Coutts director for London launch

Manchester wealth firm hires Coutts director for London launch

Former Coutts director Tony Robinson has joined Chartered Wealth Management to head the company’s newly opened London office.

Wealth Manager on Twitter