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PSigma’s Becket on a return to EM value and why you’ve got Japan all wrong
by Elsa Buchanan on May 23, 2014 at 11:37
Self-declared contrarian investor Tom Becket, chief investment officer at PSigma, says now is the time to put confidence in emerging markets (EM).
‘Overall, we should have seen a bigger correction in equity markets over the last month but a line has been drawn under that correction and markets are now probably propped up by M&A activity and further M&A potential.
‘So a lot of investors are making the mistake of translating an improving economic backdrop into positive future stock market returns. While we think there are some pockets of real value around the world, I believe most equity markets appear to be about the right price.’
In the firm’s balanced portfolio equity allocation, which has recently tilted back to a neutral position, Becket has a 7.5% exposure to North Asian value markets, particularly in China, through core positions in the Allianz China Equity and BlackRock’s Asian Growth Leaders funds.
‘Emerging market (EM) valuations are now cheap and the cheapest among them are the markets like China, Hong Kong, Korea and potentially Taiwan. We’re backing ourselves with conviction there, and the more people get bearish on China and the rest of the EM, the more interesting it gets.’
He said the next move would be to go overweight EM and put more emphasis behind the North-Asian value trade, but acknowledges his allocation to Chinese equities has been a drag over the last year.
Over the last 12 months, the model is up 4.82%, compared to the ARC Sterling Balanced Asset PCI benchmark, which rose 3.17%. Over three years the portfolio delivered 17.28% versus 14.59% by the index.
Performance was driven by Becket’s structural overweight to European equities in the second half of 2013, which he has kept but refined towards peripheral European markets with an increased focus on financials.
In a typical contrarian slant, Becket remains committed towards his hedged Japanese equity play, which he also holds to access global growth ‘at the right price’.
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