Posted inEmerging MarketsFRENELUX

Dutch fund selectors go for EM value

Almost half of the attending investment professionals said they would rather buy value stocks than growth equities in the emerging markets. This is considerably more than the 36% who still prefer growth stocks.

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“These voting results are surprising, as there still is a fixation on EM growth stocks in most of Europe,” said Robert Secker, who manages the M&G Global Emerging Markets Fund. And indeed, The Netherlands is the only country in Europe, according to EIE data, where EM value stocks are more popular.

Focus on profits

The surprise poll outcome supported the investment case Secker tried to make during the morning. “Headlines on emerging markets tend to focus on growth and numbers, but you need to look beyond that”, he said. Instead, investors should focus on the ability of a company to generate profits. “Buying a shrinking emerging markets company can be a better investment than buying a rapidly expanding one.”

He gave the example of South-African Standard Bank, which expanded outside Africa a few years ago only to see profitability going down. After the bank decided to retreat back to Africa, profits started to rebound again. 

Part of the Bonhill Group.