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Fund managers hoping for stock rally look to emerging markets

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NEW YORK (Reuters) – After emerging market stocks led global equity markets lower in a brutal 2018, some U.S.-based fund managers are betting that the asset class may have the largest rebound in the new year.

Traders work on the floor of the New York Stock Exchange (NYSE) in New York, U.S., December 28, 2018. REUTERS/Jeenah Moon/File Photo

It may not look likely at the moment, given that an economic downturn in China prompted iPhone-maker Apple Inc (AAPL.O) to lower its quarterly revenue forecast on Wednesday for the first time in a decade. Its shares slumped nearly 10 percent after Chief Executive Tim Cook blamed the U.S.-China trade war and “economic deceleration,” prompting broad selloffs around the world the following day.

Yet fund managers from Westwood Holdings Group, GMO, T. Rowe Price and Causeway Capital Management are among those who are betting that emerging market stocks will post outsized gains in 2019. They cite a combination of compelling valuations and a likely decline in the value of the dollar that will help accelerate economic growth.

As China continues to bear the brunt of U.S. President Donald Trump’s focus on trade tariffs, fund managers are expecting that shares in countries like India, Thailand, Peru, and Brazil will outperform the China-dominated emerging market benchmark index.

“We want to lean into the fear in the markets,” said Sebastien Page, head of asset allocation at T. Rowe Price. He expects emerging markets will outperform in the year ahead as the Federal Reserve curtails its pace of interest rate hikes and the dollar subsides.

“When you have a recovery in risk assets, those that have been undervalued can snap back the most,” he said.

Emerging markets have been in a bear market since September, placing them already four months into the deep declines that rocked the U.S. equities market in December. The average bear market in emerging markets has lasted 220 days and posted a decline of 32.4 percent, or about 7 percentage points more than the roughly 25 percent drop in the MSCI Emerging Market Index since it hit near-record highs last January, according to data from Ned Davis Research.

While emerging markets started the year with another roughly 1.7 percent loss over the first two trading sessions, fund managers say they are increasing their bets on stocks in countries that are among the most beaten-down, expecting they will have the largest rebound if and when a global bull market in equities resumes.

“I’m actually a lot more positive than this time last year because there are tremendous opportunities to add to high-quality names in insurance and some banks,” said Patricia Perez-Coutts, portfolio manager of the Westwood Emerging Markets fund.

She has been increasing her stakes in South Africa, Thailand and Peru, she said, with the largest positions in companies such as South African life insurance company Sanlam Ltd (SLMJ.J) and Credicorp Ltd (BAP.N), Peru’s largest financial holding company. Shares of Credicorp are up 8.8 percent over the last 12 months, while shares of Sanlam are down 3.9 percent over the same time.

Perez-Coutts has been underweight China since the start of last year, though she is starting to wade back in by buying shares in gaming and e-commerce companies that have plunged.

“Though China’s overall economy may not be growing as strongly as it did in the past, there are still areas of strong growth,” she said.

Joe Gubler, a quantitative portfolio manager at Causeway Capital Management, says emerging markets remain a compelling opportunity with a forward price-to-earnings ratio of approximately 10 even after the recent declines in the U.S. market have pushed the forward price-to-earnings ratio of the S&P 500 to slightly below 15 for the first time in about 5 years.

As a result, Gubler has been increasing his positions in small-cap companies in India, as well as energy companies that have sold off as the price of oil has tanked. He has also been increasing his position in companies that could benefit if there is a breakthrough in global trade talks.

“The market is not in a mood to give emerging market stocks much credit,” he said. “If you look at the chart, the emerging market index is sitting at about the same place it was in 2009.

“If you had a let-up in trade and interest rates, you could see a decent-sized rally.”

Reporting by David Randall; Editing by Dan Grebler

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Independent Consultant Beginner – 6 Should Have Pieces Of It Technology And Software

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Prima Wireless Earbuds Reviewhttps://primawirelessearbuds.net/.

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What Make Sure You Really Know Right Anyone Decide To Travel

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When traveling with children advised plan your route in advance. Do a little research and see as relevant and fun places to stop such as parks, museums or other attractions. Once you take breaks every non-chemical hours so everyone maybe even including the children probably get out and stretch their legs.

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Majority of Canadian workers willing to take less pay for a workplace pension plan: survey

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A majority (70 per cent) of Canadians say they’re willing to forgo a higher salary in exchange for a workplace pension plan, according to a new survey for the Healthcare of Ontario Pension Plan by Abacus Data.

The survey, which polled more than 2,000 Canadian adults in April, signals an opportunity for employers to build back the post-coronavirus pandemic working landscape better by expanding access to good retirement plans — whether they’re defined benefit, defined contribution or group registered retirement savings plans, says Steven McCormick, senior vice-president of plan operations at the HOOPP.

According to the survey, a secure retirement remains of greater concern for Canadians than concerns about their health, debt load and job security. McCormick says this has been a consistent worry the HOOPP has seen in survey results over the past couple of years. Nearly half (48 per cent) of respondents said they’re very concerned about having enough money in retirement, while 31 per cent were highly concerned about their personal debt load and 26 per cent cited their job security. Close to half of respondents expressed high concerns for their physical (43 per cent) and mental (40 per cent) health.

In addition, the pandemic has harmed the finances of more than half (52 per cent) of Canadians’ surveyed and it’s had a particularly disproportionate affect on the finances of younger adults. Adults aged 44 and younger said they’re twice as likely (25 per cent) to have had their finances greatly harmed, compared to those over the age of 60 (12 per cent).

Generally, younger adults tend to work in roles that may have been impacted most by the pandemic, says McCormick, whether in service industries that were shut down or frontline health care that have been busy but don’t always come with access to a pension plan. “Affordability is an issue, so I think their worries increased during this time.”

And while almost half (46 per cent) of Canadians surveyed said they’ve saved more money than they would have since the onset of the pandemic, among these respondents, over half (52 per cent) didn’t put any of their savings toward their retirement. Overall, most (63 per cent) Canadians surveyed haven’t set aside or saved anything for retirement in the past year, a five-point increase since 2019.

McCormick says this may be due to uncertainty or hesitancy about whether people’s immediate needs outweigh longer-term needs. And with 55 per cent of respondents noting they were very concerned about the cost of day-to-day living, he adds that rising prices have fuelled insecurity and worries so people are creating their own emergency funds right now.

While there’s a segment of the population who’ve saved more and, for them, the pandemic has created wealth, he doesn’t see this as a common narrative in the survey data. “If you don’t have access to a workplace pension or the opportunity to have things like automatic enrolment, the uncertainty of the time may have you holding onto money,” says McCormick. “In Ontario, we’re more optimistic about the pandemic than we were maybe a month ago, but there are still people worrying about whether there’ll be a fourth wave.”

In addition, more than two-thirds (67 per cent) of respondents said a retirement crisis is looming and 65 per cent said saving for retirement is prohibitively expensive. It’s a common and shared dream for many people in looking forward to a secure retirement, says McCormick, noting for many, making that dream a reality remains elusive.

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