Stephen Cohen, director de estrategia de inversión de iShares para EMEA. iShares: la renta variable emergente aún tiene recorrido
Stephen Cohen, Chief Investment Strategist at iShares EMEA, considers there is still potential for emerging markets equities. Even after the last rally. “EM equities’ out performance in the past five months has left broad EM and China testing recent year highs. Since mid-March, EM has outperformed developed markets, with the MSCI EM up 15%, China H Shares 24% and China A Shares 13%. Despite these gains, we think there could be more to go in the EM trade”.
According to Cohen, while still underweight EM equities in many portfolios, investors are turning significantly more positive. “This has been driven by a broad improvement in sentiment and fundamentals, led by China, positive speculative impact from elections such as India, Indonesia and Brazil, a shift from the tightening stance across EM CBs earlier this year, and markets pricing out – for now – developed market policy normalisation”.
EM data upward trend intact despite European growth tailing off
The upward trend of EM data has stayed intact even as growth has tailed off in Europe. “On a corporate level consensus, EM earnings growth for this year has been revised upwards steadily, albeit incrementally. This contrasts with Europe where consensus earnings growth has almost halved compared to the start of the year”.
According to Cohen, a change in the developed market policy outlook could undermine EM momentum but a lack of wage growth in the US and the UK, and fast falling inflation expectations in Europe are currently providing a renewed benign rate environment.
Reiterate call on China, Korea and Taiwan
“For China, headline easing is not likely but Chinese authorities should continue to ease on the margin in order to meet the year-end growth target, especially since recent data is starting to plateau. We also reiterate our call on Korea, which has recently delivered a rate cut and announced plans for reform, and Taiwan”.
Nonetheless, investing in EM does not come without its risks. “Geopolitical risks continue, giving a safe haven bid to the US dollar and a headwind for EM currencies. On a country level we are watching the upcoming October election in Brazil. BOVESPA has rallied 25% during the EM recovery on hopes for a market-friendly election outcome while fundamentals have deteriorated sharply.”
Photo: Martin Falbisoner. Investors Still Believe in the Emerging Market Story
Emerging market (EM) equities have performed well this year, thanks to better Chinese data and improved attractiveness relative to Europe. Inflows therefore are strong. In a recent report ING IM states that, although the asset management firm remains overweight EM equities, they did close their overweight position in EM debt in Hard Currency recently.
Emerging market equities have performed relatively well in the past months. One of the reasons is that the concerns about China have been pushed to the background in recent months.
In reaction to a persistently weakening trend in economic data, the Chinese authorities announced a fresh stimulus package back in early April. Effects of those measures became visible pretty quickly in higher infrastructure investment growth, among others. China also profited from a rise in export growth as the global growth picture improved.
Also in relative terms emerging markets looked a bit better, something which is largely the result of weaker European economic data and the increased risk to the European growth outlook coming from the conflict with Russia about Ukraine.
Stabilizing economic momentum and lower expectations
Furthermore, although the EM growth momentum continues to be weak, it has not deteriorated anymore in recent months. The EM economic surprise index has declined a bit recently, but remains close to zero. Expectations are clearly not as high as they used to be. This is also reflected in relative valuations of EM equities, which are firmly below their five-year average.
Strong inflow into EM equity funds
Moreover, there has been a strong fund flows in the past months. Even in weeks when general risk aversion pushed markets lower, EM equity funds received fresh money. In the past two months, weekly inflows have averaged US$ 2 billion. Of course, fund flows can reverse quickly and should never be the main reason to like a market, but their resilience in difficult times does say something about the strength of an investment theme.
ING IM holds on to their overweight position in EM equities
At this point, it is mainly the negative dynamics in Europe that justify a more positive stance towards emerging markets. These worsened dynamics probably have diverted a significant part of investment flows from Europe to EM equities.
Stabilizing growth, more realistic expectations, low relative valuations and good fund flows are positive factors as well, but are not very convincing given the still negative fundamentals in the emerging world. Nevertheless, as long as flows into EM equities remain significant, ING IM does not see enough reason to reduce their (small) overweight position in EM equities.
You may access the full MarketExpress report through this link
KBS Real Estate Investment Trust III, a public non-traded real estate investment trust based in Newport Beach, California, has announced the acquisition of 171 17th Street, a 21-story, trophy quality office building in Atlanta for $132.5 million plus closing costs. JP Morgan was the seller. It was 89-percent leased at closing.
171 17th Street is a 509,237-square-foot property that was the world’s first LEED Silver Core & Shell certified high-rise building. It is located in the Midtown submarket of Atlanta and is part of the larger Atlantic Station mixed-use project. Amenities include on-site café, conference center and shuttle service.
“171 17th Street is a trophy quality asset that KBS REIT III is pleased to add to its portfolio,” said KBS Eastern Regional President Marc DeLuca. “With its high-end finishes, trophy-quality construction and expansive lobby, 171 17th Street stands out in this highly walkable urban marketplace.”
Atlantic Station comprises 5.6 million square-feet over 138 acres and includes 20 restaurants, 50 retailers, a luxury boutique hotel, a movie theatre, 2,700 upscale residential units and three Class-A office buildings. It also is established as a top destination for entertainment events.
KBS-affiliated companies own two other office properties in Atlanta: the 188,509-square-foot Northridge Center I & II and 138,068-square-foot Overlook I.
Maria Cure. Photo: Funds Society. Maria Cure Joins the Ranks of HSBC in Miami as an Investment Counselor
Maria Cure has left her position at Citibank to join the Investment Strategy team at HSBC in Miami as an Investment Counselor. As confirmed to Funds Society by sources close to the appointment, Cure will report to Esteban Zorrilla, team leader for the Miami office.
With over 10 years’ experience, Cure joins the bank after four years at Citi, where she was Investment Counselor for Citigold segment private clients. Prior to that she spent seven years as a fund analyst, portfolio manager and financial analyst at Guggenheim Partners.
She holds a Degree in Business Administration from Florida International University, and an MBA from the same university.
Caroline Maurer, Fund Manager, Henderson Horizon China Fund. Chinese Equities — Positioned for a Rebound?
As forecast earlier in the year, China’s economic growth seems to be stabilising due to better macroeconomic management. The gross domestic product (GDP) growth in Q1 and Q2 was 7.4% and 7.5% year-on-year, respectively. The central government remains confident that annual GDP growth will stabilise at 7.5% for 2014, with the expectation that Q3 growth will exceed 7.5% since it is a critical quarter for economic activities. To achieve that objective, the monetary policy must remain accommodative and fiscal spending must stay robust.
We believe the following three themes will also have a significant impact on China’s short to medium term growth:
Realisation of the Shanghai-Hong Kong connectivity
The Shanghai–Hong Kong stock connectivity scheme was initially announced on 10 April and the official launch is expected to happen in October this year. The scheme allows investors mutual access to the Hong Kong and Shanghai stock exchanges subject to a quota restriction, although we believe this quota will be increased overtime. We expect fund flows will flourish for both markets as a result benefiting stock exchanges and brokers on both sides. Companies with unique market positioning that are listed on only one exchange currently, such as Tencent and Kweichow Moutai, will surely attract investors on the other side.
Continued progress in SOE reforms
State-Owned Enterprises (SOEs) in China contributed significantly to the country’s investment-driven economic growth in the past three decades. At the same time, such economic structure has also led to issues such as misallocation of limited financial capital, excessive management focus on scale instead of return on asset, and insufficient incentive to innovate. As growth momentum slows, these embedded problems are becoming more evident. We believe the SOEs with improved operating efficiency can help offset some of the short-term negative impact and contribute to China’s economic growth. More importantly, over the long term, these reforms should invigorate private sector investment and help revitalise the economy by creating a fairer business environment.
Year to date, SOEs that made positive progress in restructuring, such as Sinopec, Datang Power and Sinotrans Limited, have outperformed the overall market. As more SOEs go through various phases of restructuring, we expect to see further divergence in performance across sectors and stocks. Although it is difficult to quantify the net impact of SOE reforms, we expect any marginal improvement to surprise on the upside since investors are generally sceptical about the potential benefits.
Cost savings from anti-corruption measures
The anti-corruption campaign thus far has hurt discretionary spending, especially high-end goods and catering services. Fortunately mass market consumption, supported by stable employment conditions and wage increases, has helped partially offset the negative impact. Therefore, the anti-corruption measures will likely improve investor returns in the medium term as SOEs reduce cost and improve efficiency through the process
We believe the following companies are poised to benefit from these themes:
Sinopec is looking to sell 30% of its marketing division to private investors by the end of Q3. Perceived as a pioneer SOE reformer, this asset sale will serve as a showcase for mixed ownership programmes. We expect the company to make material progress on this front in Q3 and Q4, and the current stock price does not seem to fully reflect the upside potential.
Hong Kong Exchange is a major beneficiary of cross border trading. The much anticipated mutual connectivity between Hong Kong and Shanghai exchanges will likely result in increased trading activity in the Hong Kong market if the quotas are expanded. If the connectivity proves successful, we expect to see a significant boost in the company’s earnings for 2015 and 2016.
Baidu seems well positioned to profit from the trend of Chinese users increasingly relying on their mobile devices for internet searches. The mobile division’s share of total revenue continues to rise, helping to drive robust top-line growth. We expect the company’s profit margin to bottom out this year after spending heavily on sales and marketing. The stock valuation is cheaper than peers such as Tencent.
Looking ahead
We believe the short-term bias toward accommodative monetary and credit conditions along with continued government spending on infrastructure — especially railways and public housing — will help support the growth outlook for this year. On the backdrop of a stabilising macro environment and positive reform momentum, we believe Chinese equities are positioned for a rebound in the remainder of the year because they are undervalued on various metrics.
Opinion column by Caroline Maurer, Fund Manager, Henderson Horizon China Fund
Note: References to individual companies or stocks should not be construed as a recommendation to buy or sell the same
Foto: SMWalton, Flickr, Creative Commons. Espírito Santo firma un acuerdo con FIG Partners para la venta del banco en Miami
Espírito Santo Bank has announced the signing of a letter of agreement with FIG Partners, an investment banking firm, to assist with the sale of the bank in Miami. “I’ve known Tom Rudkin, principle of FIG Partners, for many years,” says G. Frederick Reinhardt, Chairman & CEO Espírito Santo Bank. “I am confident that he and his team have the bank and, most importantly its clients, best interest at heart and that the process with be swift and effective,” continues Reinhardt.
Espírito Santo Bank Miami no longer has any ties to its former parent, which was taken over by the Bank of Portugal. All future events, whether financial or governmental, involving the institution in Portugal will have no further impact upon ESB Miami and its operations.
“Simply put, we have severed all ties to our former parent, and Espírito Santo Bank Miami is now completely independent, with its own board. Further, all Espirito Santo family members voluntarily stepped down from our board on August 6, 2014,” says Reinhardt. “Our clients will no longer experience an impact upon ESB Miami from BES, and will in fact see continued growth in the coming months as we seek a new owner,” continues Reinhardt.
Since 2012, FIG Partners has completed over 30 Merger & Acquisition (“M&A”) transactions and is ranked third in the country. In addition, year-to-date 2014, FIG Partners is ranked 4thin the country in the number of M&A transactions via its offices in Chicago, Los Angeles, San Francisco and its headquarters in Atlanta.
“Espírito Santo Bank presents an excellent opportunity. The bank has a strong franchise value and is profitable, and I look forward to working with Fred Reinhardt and his executives during a successful search and identification of highly qualified buyers, in a reasonable time frame,” says Thomas G. Rudkin, principle, FIG Partners.
Mr. Rudkin has more than 30 years of experience in the community banking arena in Florida, the northeast, and the Midwest of the United States. He is responsible for originating and closing more than $400 million in transaction value in the state of Florida.
Florida Chartered since 1973, Espírito Santo Bank provides wealth management and personal/corporate banking services, residential/commercial real estate lending and trade finance services to domestic and international individuals, institutions, and corporate clients. A team of multi-lingual and multi-cultural Financial Advisors and Product Specialists – experienced in the United States and international markets – customize strategies for clients.
Equipo de Desarrollo de Negocio US Offshore de Aberdeen AM en sentido de las agujas del reloj: Menno de Vreeze, Andrea Ajila, Damian Zamudio y Maria Cordova. Aberdeen AM nombra a Menno de Vreeze director de Desarrollo de Negocio Offshore en las Américas
Aberdeen Asset Management announces thatMenno de Vreeze has been appointed Head of Business Development-Offshore in the Americas, replacing Silvana Barrenechea, who has moved to Aberdeen’s London office where she will be responsible for global key accounts. Menno will oversee the offshore business development teams in Aberdeen’s New York City and Miami offices. Menno joined the firm in April 2010 as Head of Financial Institutions Benelux (Belgium, Luxembourg and the Netherlands) in Luxembourg.
Aberdeen’s footprint in the Americas offshore channel has steadily grown over recent years. Investors have recognized the firm’s investment expertise in equity, multi-asset and fixed income products for both institutions and private individuals, with $541 billion in assets under management globally as of April 30, 2014. “We believe that Aberdeen’s wide range of products, combined with our disciplined approach to investing and focus on client service, offers a sturdy platform on which to build”, states the company.
Along with his team members, Damian Zamudio, Maria Cordova and Andrea Ajila, Menno will further build on strengthening the relationships Aberdeen has already made with various financial institutions.
Londres. Foto: Carlescs79, Flickr, Creative Commons. Santander AM incorpora a sus filas a Divya Manek como gestora de Renta Fija Europea
Santander Asset Management UK has appointed Divya Manek as a new fund manager in its Global European Fixed Income team, focusing on European Bond Strategies. Based in London, she will report to Adam Cordery, global head of European Fixed Income, according to Investment Europe.
Manek will work primarily on Santander Asset Management’s three euro credit mutual funds (Euro Corporate Short Term, Euro Corporate and Renta Fija Privada).
Adam Cordery, global head of European Fixed Income, said: “I am delighted Divya has decided to join the firm. She is a strong addition to the recently created European Fixed Income team and I look forward to working with her.”
Manek spent the last seven years at Schroders, working on its flagship EUR/GBP mutual funds and managing segregated mandates. She obtained a first-class engineering degree from the University of Mumbai in 2006, graduated top of her class at the Cass Business School in 2007 and became a CFA Charterholder in 2010.
Espirito Santo Plaza. Exan Capital, as Exclusive Advisor, Manages the Sale of the Espirito Santo Building in Miami
The Espírito Santo family, majority owners of the Portuguese bank that bears its name, and which has recently been split in two and partially rescued, is in a difficult financial situation due to the bank’s collapse.
Under these circumstances, the family put the office towerlocated in the Brickell area, and which serves as headquarters for the bank’s activities in Miami, up for sale months ago. As reported to Funds Society by sources close to the Espírito Santo Group, the sale of the building it owns at 1395 Brickell Avenue is being managed since last May by the Miami based company Exan Capital, as exclusive advisor.
Rio Forte Investments, a company controlled by the Espírito Santo family, in turn controls Estoril Inc, the entity which owns the Espirito Santo Plaza. The Portuguese bank, Espirito Santo, gave Estoril a mortgage on the property, which has already been settled. This building houses the Espirito Santo bank’s Miami headquarters.
At an advanced selling stage
Major private and institutional U.S and foreign investors groups have been invited to the sale process. Apparently the process is in the final stage of negotiations with an investor group for an amount exceeding US$110mn.
The building, built in 2004 with an area of 659,753 square feet, has several components: offices, retail, parking, hotel, and condominiums. The Espirito Santo Group owns offices, retail space, and parking. The Espirito Santo bank’s Miami headquarters is located in this building.
Sale of the Tivoli Hotel chain
The Portuguese group also owns the Tivoli Hotel chain which is also up for sale and in a similar situation. The selling price of the hotel chain is around US$400mn.
The sale of these two assets can inject a large amount of liquidity to the group within a very short period of time. This is necessary considering the group’s financial situation after the collapse of the Portuguese bank.
KKR has announced that Jaka Prasetya, former Managing Partner and Founder of Leafgreen Capital Partners, is joining the firm as Managing Director to lead KKR’s Indonesia efforts as well as credit and special situations initiatives in Southeast Asia. Also joining KKR in the role of Director are Rahul Bhargava and Allan So, both formerly managing directors and partners at Leafgreen. Messrs. Prasetya, Bhargava and So will be based in Singapore. The appointments are effective August 26, 2014.
In his role, Mr. Prasetya will work with KKR’s private equity, credit and special situations teams to enhance the firm’s strategy in Indonesia. In addition, supported by Messrs. Bhargava and So, Mr. Prasetya will also lead KKR’s credit business in Southeast Asia. They bring extensive investment experience to the region through their work at Leafgreen, a provider of mezzanine and structured growth funding in Southeast Asia with a focus on Indonesian opportunities.
“Indonesia continues to be a dynamic market for investment with great growth potential and positive demographics driving opportunities. With our first deal in the market in 2013, we look forward to exploring new opportunities to provide both equity and credit solutions to companies to suit their long-term needs,” said Ming Lu, Member & Co-Head of Asia Private Equity at KKR. “The addition of Jaka, Rahul and Allan – who have a deep understanding of Indonesia’s local culture and business environment – greatly enhances our ability to partner with Indonesian companies. We welcome them and the experience that they bring to the team.”
Mr. Prasetya launched Leafgreen in 2011 to finance mid-cap companies in Indonesia, Malaysia and Singapore. Prior to his time at Leafgreen, Mr. Prasetya was the Managing Director and Head of Principal Investments Asia at Raiffeisen Bank International. He previously held senior management positions at United Fiber System and Deutsche Bank. He holds an MBA from MIT Sloan School of Management and earned his Bachelor of Engineering from the Institut Teknologi Bandung in Indonesia.
Mr. Bhargava joined Leafgreen in 2013 after 12 years at Henderson Global Investors, where he was a founding member of the Asian private equity business. Mr. Bhargava is a CFA charterholder, has an MBA from the Australian Graduate School of Management and earned his Bachelor of Science degree in Economics, with honors, from the University of Calcutta.
Before joining Leafgreen in 2011, Mr. So held structured-credit responsibilities at Société Générale, Standard Chartered, Calyon, J.P. Morgan and Centre Solutions in Hong Kong, and Salomon Smith Barney in New York. Mr. So holds a Bachelor of Science from Columbia University.
“With urbanization, rising wages and a young and growing working class, we see excellent opportunities in Indonesia with good companies looking for varied financial solutions,” said Mr. Prasetya. “KKR’s holistic approach to providing businesses with capital solutions, from debt to straight equity, is a unique prospect in this market – Rahul, Allan and I look forward to expanding upon the firm’s investments there.”
