Islington Associates wealth management Zurich Switzerland Agree to this article.
NEW YORK (Reuters) – The steep decline in emerging market stocks since early this year are attracting some U.S. fund managers who think they may find long-term bargains amid the sell-off.
Portfolio managers from Harding Loevner, Federated Investors, and Wells Fargo are among those who have been adding emerging markets stocks to their portfolios in the face of the imposition of import tariffs by President Trump and rising interest rates in the U.S.
Emerging market asset prices have been hit hard this year. The MSCI index of emerging market stocks .MSCIEF closed Friday at its lowest since May 2017 and it is down about 21 percent from January’s high. An MSCI index of emerging market currencies .MIEM00000CUS is down 8 percent from its 2018 high, hit in March.
On Thursday, JPMorgan cut its rating on Chinese equities, the largest weight on the benchmark index, to neutral from overweight on expectations that a protracted trade war with the United States will hurt the Asian giant’s economy next year.
Yet some U.S. international and global fund managers say that emerging markets offer better deals than the U.S. market, where stocks continue to hit record highs.
“We’re finding opportunities because of the trade war,” said Chris Mack, a portfolio manager of the Harding Loevner Global Equity fund.
U.S. President Donald Trump has slapped tariffs on more than half of the $500 billion the U.S. imports from China yearly, for which Beijing has retaliated.
Investor concern about the impact of the trade war has sent stocks in China and other emerging markets sharply lower this year.
Mack’s fund has its highest weighting in emerging market stocks since 2006 and its lowest in the U.S. since the same year in search of better values, he said.
The fund sold its position in Google’s parent Alphabet Inc (GOOGL.O) and bought South Korea’s Samsung Electronics (005930.KS). Investors pay more than $25 for every $1 in earnings expected over the next 12 months at Alphabet, while they pay just over $6 at Samsung according to forward price-to-earnings estimates.
“You’re getting the benefits of a company that is being boosted by a secular trend at a much cheaper price,” Mack said