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Mark Mobius: Emerging Markets To Continue Outperforming
Aspire, Hot Picks, Investments | 14 July 2015
By: Raymond Leung
Articles (142) Profile

In the past year, emerging markets (EM) have been showing signs of slowdowns. Popular markets such as Brazil, China and Russia began to weaken. With China being the most recent country to hog the headlines, investors are worried that EMs are no longer growth-guaranteed markets.

However, Mark Mobius believes that regardless of slowdown, EMs will still outperform developed markets in terms of Gross Domestic Product (GDP). He reiterated his support for EMs and encourages investors to focus on the correct investment themes.

Source: GDP % Change of Developed vs EM, Franklin Templeton Investments

The Banking Sector: Health Of The Economy

To measure the health level of an EM, Mark believes that the performance of its banking sector is the best gauge. When the banking sector performs well, it generally means that the economy is doing well, most of the time.

All three local banks, namely DBS, OCBC and UOB have presence in EMs. DBS is currently the strongest bank in China among the three Singaporean banks, while OCBC and UOB have sizeable presences in EMs in South-east Asia.

The Consumer Goods Sector: Spending Of Extra Cash

As the economies of EMs grow, locals will have more extra cash to spend as they earn more money. Mass market products such as beer, soft drinks, snacks and instant noodles are popular products that consumers will spend on with extra cash.

Super Group (Super) has been selling its instant coffeemix for more than 20 years in Myanmar, its second biggest market. Annually, Super exports 650 million sachets of coffeemix to Myanmar and is the number one instant coffee retailer in the country.

Japfa is more than an upstream food supplier but has a few well-known consumer food brands under its belt. The group sells processed food in Indonesia under the brands “So Good” and “So Nice” while selling ready to eat sausage through its brand, “So Yumm”.

The most notable company to fit in this category will be Thai Beverage (THBEV). Founded in Thailand, the conglomerate expanded to become the largest beverage company in South East Asia and is most famous in Singapore for taking over Fraser and Neave (FNN).

The Construction Sector: More Direct Relation To GDP

Construction industry stands to gain the most from a rising GDP; particularly companies involving in consumer or retail space. This will include construction companies, their suppliers of materials and equipments and retail Real Estate Investment Trusts (REITs).

China is one of the core markets for CapitaLand (CAPL) as it is heavily involved in building and operating residential and commercial properties. The group had spinned off a retail trust, CapitaLand Retail China Trust (CRCT), which CAPL sells and operates some of its Chinese retail properties.

Yoma Strategic (Yoma) is a direct proxy to the property market in Myanmar. With a strong land bank in Yangon, it is well positioned to gain from the lack of supply of quality residential and commercial properties.

Parkson Retail Asia (PRAL) is a departmental store operator with 65 stores spreading across Malaysia, Vietnam, Indonesia and Myanmar. Its expansion into Myanmar is an attempt to fill the vacuum from the lack of departmental stores in the country.

Last but not least, Lippo Malls Indonesia Retail Trust (LMRT) is a trust, which owns 17 retail malls and seven retail spaces in malls across Indonesia. Yield driven investors may find the ten percent yield of LMRT extremely attractive.

Raymond is vested with interest in Super Group.

Trained in fund management, Raymond is familiar with shares and various investment vehicles.

Please click here for more information about this author.

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