EVENT ROUND-UP PA EMERGING MARKETS FORUM
Daniel Tubbs, fund manager,
BlackRock Asian EM Fund
Ewan Thompson, fund
manager, Neptune Emerging
Markets Fund
Sam Mahtani, director of
emerging market equities, F&C
Investments
Emerging potential
The Portfolio Adviser Emerging Markets Forum saw seven leading
fund managers discuss opportunities in the emerging world
BY GARY CORCORAN AND
GARY SHEPHERD
Daniel Tubbs, fund manager,
BlackRock Asian Emerging
Markets Fund
BlackRock’s Tubbs focused
on startling demographic
statistics in the emerging
world.
According to MSCI, there
are 22 global emerging
markets and 24 frontier
markets, which together
account for 86% of the
world’s population, 75% of
the world’s land mass, but
more importantly 50% of
the world’s GDP.
“Over the past ten years,
these economies have
grown about 3-5% faster
than the developed world
and we think that is sustainable,”
said Tubbs. “For this
year the IMF is forecasting
that the emerging world
will grow around 6% compared
with the developed
world at about 2%.”
He added: “Population
growth in the emerging
world is much faster – four
times faster – than the
developed world. In 2007,
the population growth was
1.4% in the emerging world
versus 0.3% in the developed
world. More consumers
will drive domestic
consumption.”
Ewan Thompson, fund manager,
Neptune Emerging
Markets Fund
In a continuation of the
themes raised by Tubbs,
Thompson turned his
attention to capital flow. It
is logical that capital should
end up where returns are
highest, historically the
emerging markets.
“It is no surprise that
these economies grow
faster – as they build roads,
suddenly there are two
cities that were not linked
before, now they are and
trade blossoms as a multiplier
effect as a leverage to
infrastructure investment,”
he explains.
“Japan, at the other end
of the scale, has to work
much harder. To get every
little incremental bit of
GDP growth, they have to
furiously innovate and be
very productive, but it is
just that bit more difficult.”
Thompson referred to
Neptune’s own in-house
calculations on share of
incremental GDP growth.
In the ’90s, emerging economies
accounted for just 8%
of world growth, though
over the course of the last
decade this has risen to
around a third of global
growth, though developed
economies still hold the
advantage for now.
Sam Mahtani, director of
emerging market equities,
F&C Investments
Mahtani focused on the rise
of India, which he believes
will be the big economic
story of the next decade.
“Over the next couple of
decades we are confident
India will deliver 8% to 9%
GDP growth, and within
the next five years it is
likely to overtake China,”
he said.
Mahtani highlighted
four key themes which he
believes will drive this
growth – demographics,
globalisation, reforms and
high savings rates.
In terms of demographics,
he rolled off the fact
that over 50% of the Indian
population are under the
age of 25, and it is the aspirations
of this very young
population that will drive
domestic demand.
Mahtani believes that
India is closely mirroring
China’s path to globalisation,
to the extent of copying
its policy initiatives,
such as the introduction of
special economic zones
that carry tax benefits.
Economic reform will
focus on infrastructure,
where the government has
announced a $1.7trn
spending plan for the next
decade. It is noticeable that
35% of Indian GDP is
domestic savings, with
great potential for increase
in equity participation from
retail investors.
16 PORTFOLIO ADVISER [www.portfolio-adviser.com] MARCH 2010
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