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Veritas' Meg Woods: identifying the 2020 winners

by Meg Woods on Jan 30, 2013 at 10:32

The expansion of the global middle class means emerging market consumption could make up an astonishing two thirds of the world’s total by 2050, according to Karen Ward and Frederic Neumann at HSBC.

Furthermore, the savings surpluses of the emerging world that have financed the current account and budget deficits of the West look set to continue.

Barclays 2012 Equity Gilt Study estimates that in 2002 the gap between international foreign exchange reserves and ‘safe haven’ bond issuance was a chunky 35% of global GDP, the gap being funded by the private sector. The gap has now fallen to only 12%, and is projected to remain broadly at that level through to 2021, even allowing for sizeable Western government issuance.

A gap of this order should be readily funded by the private sector. Those looking for an early return of interest rates to normality may be disappointed.

At Veritas, this approach of looking through the current malaise to what the world will look like in 2020 and beyond is the fabric of our current investment strategy. ‘Rising tide, 2020 winners’ is our core conviction theme at present.

We are constructive that the eurozone, the US and China will, step by step, work their way through their issues, but we are not going to speculate on timing nor on the inevitable attendant volatility in markets.

Rather, our strategy is to ferret out those sound businesses with a competitive edge and global perspective that we believe will become winners by 2020, and in which we can invest on a sensible valuation. Despite the challenging backdrop, there are opportunities.

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