LONDON, September 23, 2014 – Despite perceived political uncertainty and rising inflation, the valuation case for emerging markets is still compelling according to BNY Mellon’s Emerging Markets Report. In the report, fund managers from Newton, Standish Mellon Asset Management Company LLC and Insight Investment look at the latest trends affecting emerging market assets and provide an outlook for the months ahead. The report includes views on the growth of long/short strategies in emerging market fixed income, insight into the impact of political risk on the sector and the influence of China.
Sophia Whitbread, emerging market equity income manager at Newton comments on the factors supporting valuations, “Monetary conditions in the West look set to remain relatively loose for some time, as key developed markets continue their struggle with heavy debt burdens. Against this context, we continue to see emerging markets as relatively well-positioned globally, and find the current valuation of emerging markets compelling, both relative to other areas and on an absolute basis. We also believe that demand for equities for their income will continue to be supported by ageing demographics in developed markets as older people seek income for their retirement in a low-interest rate environment. Against an uncertain backdrop, with significant divergence in trajectories of countries in both developed and emerging markets, differentiation between markets and individual stocks will become increasingly important.”
Looking at where investors should consider for value in local currency emerging market bonds, Alex Kozhemiakin, head of emerging market debt at Standish, sees the most value in Latin American markets such as Brazil, Mexico and Colombia, as well as in South Africa. Kozhemiakin comments “We view other local currency bond markets of the Europe, Middle East and Africa (EMEA) region as less fundamentally attractive and feel the Asian markets are expensive. In US dollar debt Standish favours some EMEA countries, including Kazakhstan where we see very good value in some quasi sovereigns backed up by high oil prices.” Standish also favours Lithuania, citing its strong credit quality. Colombian external bonds are also favoured. Across US dollar denominated debt Kozhemiakin sees more value in quasi-sovereigns and corporates than in sovereigns, particularly for the larger, highly rated countries.
Regarding the emerging market corporate debt universe, Rodica Glavan, Insight Investment’s emerging market debt portfolio manager, sees pockets of value in places like China but cautions that investors have to be distinguishing in their choices. Glavan also sees some value in Indonesia but is less positive on South Korea and Taiwan. Calling Eastern Europe interesting with fluctuating dynamics, Glavan says “There is not an appealing level of diversification available in these markets just yet. Turkey and Russia may have more issuance than Hungary or Poland but of course, you have to be cognisant of what is happening in these countries at a political level. Latin American issuance has risen in places like Mexico and Brazil but also in Chile, Colombia and Peru. As a result of a lot of good quality in Mexico it has become somewhat expensive whereas Insight does see some value in Brazil, which had a difficult year in 2013.”
Newton is a London-based global asset management subsidiary of The Bank of New York Mellon Corporation and part of BNY Mellon. With assets under management of £50.9bn (as at 30 June 2014) including assets managed by Newton Investment Management Limited as dual officers of Newton Capital Management Limited and The Bank of New York Mellon, Newton's group of affiliated companies provides a broad range of investment products and services to pension funds, charities and corporations. News and other information about Newton is available at http://www.newton.co.uk/ or follow us on Twitter @NewtonIM.
Insight Investment is a leading asset manager focused on designing investment solutions to meet our clients’ needs. Founded in 2002, Insight’s collaborative approach has delivered both investment performance and impressive growth in assets under management. Insight manages £289bn ($495bn) (as at 30 June 2014) across fixed income, liability-driven investment, absolute return, cash management, multi-asset, specialist equity and currency strategies. Insight Investment is owned by BNY Mellon. More information about Insight Investment can be found at: http://www.insightinvestment.com/
Standish Mellon Asset Management Company LLC, with approximately $162 billion (as at 30 June 2014) of assets under management, provides investment management services across a broad spectrum of fixed income asset classes. These include corporate credit, emerging markets debt (dollar-denominated and local currency), core / core plus, tax–sensitive, short duration, stable value and opportunistic (U.S. and global) strategies. Standish also offers full service capabilities in insurance client strategies and liability driven investing. The firm includes assets managed by Standish personnel acting as dual officers of The Dreyfus Corporation and The Bank of New York Mellon and Alcentra NY, LLC personnel acting as dual officers of Standish.
BNY Mellon Investment Management is one of the world's leading investment management organizations and one of the top U.S. wealth managers, with $1.6 trillion in assets under management. It encompasses BNY Mellon’s affiliated investment management firms, wealth management services and global distribution companies. More information can be found at www.bnymellon.com.
BNY Mellon is a global investments company dedicated to helping its clients manage and service their financial assets throughout the investment lifecycle. Whether providing financial services for institutions, corporations or individual investors, BNY Mellon delivers informed investment management and investment services in 35 countries and more than 100 markets. As of June 30, 2014, BNY Mellon had $28.5 trillion in assets under custody and/or administration, and $1.6 trillion in assets under management. BNY Mellon can act as a single point of contact for clients looking to create, trade, hold, manage, service, distribute or restructure investments. BNY Mellon is the corporate brand of The Bank of New York Mellon Corporation (NYSE: BK). Additional information is available on www.bnymellon.com, or follow us on Twitter @BNYMellon.
All information source BNY Mellon as of June 30, 2014. This press release is qualified for issuance in EMEA and is for information purposes only. It does not constitute an offer or solicitation of securities or investment services or an endorsement thereof in any jurisdiction or in any circumstance in which such offer or solicitation is unlawful or not authorized. This press release is issued by BNY Mellon Investment Management EMEA Limited (ex-US) to members of the financial press and media and the information contained herein should not be construed as investment advice. The value of investments and the income from them is not guaranteed and can fall as well as rise due to stock market and currency movements. When you sell your investment you may get back less than you originally invested. Registered office of BNY Mellon Investment Management EMEA Limited: BNY Mellon Centre, 160 Queen Victoria Street, London, EC4V 4LA. Registered in England no. 1118580. Authorized and regulated by the Financial Conduct Authority. A BNY Mellon Company.
Contact: Joanna Pope, +44 20 7163 2744, email@example.com
 Assets under management are represented by the value of cash securities and other economic exposure managed for clients as at 30 June 2014. The assets under management figure represents the combined assets under management of Insight Investment Management (Global) Limited and Pareto Investment Management Limited, which became part of the Insight group on 1 January 2013.