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Capital Markets

Emerging markets: Fund managers do battle in commodity minefield

In the second part of Euromoney’s emerging market equity fund manager profiles, Chloe Hayward talks to seven managers and hears what history has taught them and how they plan to find their way through the minefield of commodity-linked stock markets, notably in eastern Europe.

Part one: Emerging markets: Fund stars ride out the storm
Profiles of the leading emerging markets investors

EVEN THOUGH SHARE prices have collapsed and there are abundant opportunities throughout the emerging world, asset manager Aberdeen is wary of valuation traps. "The quality of the business is the priority, valuations are secondary," says Mark Gordon-James, investment manager on Aberdeen’s emerging market equity team.

Aberdeen’s careful approach was rewarded in March. Hargreaves Lansdown dropped Mark Mobius’s Templeton global emerging market fund from its Wealth 150 list. Instead, Mark Dampier, head of research at Hargreaves, said that Aberdeen’s emerging market fund "has the potential to deliver superior returns".

Valuation play or Armageddon

"Russia is very high risk and companies are high risk – we wouldn’t hold those businesses at any valuation," says Gordon-James.

In contrast to the other Bric countries (Brazil, Russia, India, China), Russian corporates have been off many fund managers’ radar screens. There is still concern about Russia’s economic outlook and doubt that its leading banks and companies will be able to roll over their debts this year. The country’s public and private institutions need to refinance $117.1 billion in the bond and loan markets this year, according to Deutsche Bank.

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