Over the past twelve months, the US\/China trade dispute has dominated headlines and commanded a considerable slice of the world\u2019s attention. Yet, while any breakthrough would be significant for investors and positive for sentiment in Emerging Markets (EM), we think there are several other areas that could throw up positive surprises in the year ahead, regardless of
\nhow the trade negotiations play out.<\/p>\n
Let\u2019s start with the banking sector, in particular banks in smaller emerging and frontier markets.
\nIn many instances these banks are delivering strong earnings while trading at attractive
\nvaluations. What they also boast are business models that combines the strengths of traditional
\ndeposit-taking retail banks with fintech-like innovation, allowing them to reach new clients with
\nnew products in new ways. This positions them well to benefit from rising financial inclusion,
\nwhich we see as a significant structural change in these markets. Some of the banks we are
\nreferring to, such as KCB in Kenya, and which we highlighted this time last year, have
\nsubsequently attracted investor interest. Other companies within this space however remain
\nentirely overlooked \u2013 despite solid fundamentals and a positive outlook \u2013 and we think there is
\npotential for this to reverse in the coming year.<\/p>\n
Another area that could surprise next year is technology, specifically the semiconductor
\nindustry. Shares of semiconductor companies on the whole performed well throughout 2019
\nand there is scope for more of the same in 2020. The reason for our optimism is that we are
\nseeing some significant changes in the end market. We have the advent of 5G telecom
\nnetworks, which increases the demand for semiconductors, and at the same time you have an
\nindustry that has consolidated, meaning leaders have emerged in semiconductor memory,
\nfoundry and design, all of which are positioned well to profit from change.<\/p>\n
The third surprise to highlight for 2020 would be Mexico. Mexico is a country that is out of
\nfavour with EM investors right now, but we think the country has a lot to offer. In fact, valuations
\nin the market are towards the bottom of their historical range, but at the same time, the outlook
\nfor Mexico is far better than forecast. The political backdrop is more benign than many feared,
\nand the economy is benefiting from companies choosing to relocate their manufacturing
\nactivities to Mexico, as they choose to diversify their operations away from China.<\/p>\n
Finally, while not necessarily a surprise, another factor to watch for is a swing in favour towards
\nsmall and mid-cap companies. In 2018, we held the view that small and mid-cap stocks had
\nbeen unfairly sold down by investors as the market focused primarily on macroeconomic
\nconcerns. In 2019, we saw our patience rewarded as the strong operational results of many of
\nthese overlooked companies resulted in a positive share price performance. We anticipate
\nfurther value to be realised in these off-benchmark, small and mid-cap names, particularly if
\nthe market begins to look past geopolitical turmoil and focus on fundamentals.<\/p>\n
Overall, we believe that next year we will continue to find a good selection of companies that
\nwe believe combine attractive valuations with the potential for strong earnings delivery. Given
\nour bottom-up approach, we find these companies across a wide range of sectors and markets,
\nmeaning we can build what we consider to be a fundamentally attractive, yet truly diversified
\nportfolio<\/p>\n","protected":false},"excerpt":{"rendered":"
Over the past twelve months, the US\/China trade dispute has dominated headlines and commanded a considerable slice of the world\u2019s attention. Yet, while any breakthrough would be significant for investors and positive for sentiment in Emerging Markets (EM), we think there are several other areas that could throw up positive surprises…<\/p>\n","protected":false},"author":1,"featured_media":84621,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[1480],"tags":[1655,2073,1651,2087,2068,2239],"_links":{"self":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/84623"}],"collection":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/comments?post=84623"}],"version-history":[{"count":0,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/posts\/84623\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media\/84621"}],"wp:attachment":[{"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/media?parent=84623"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/categories?post=84623"},{"taxonomy":"post_tag","embeddable":true,"href":"http:\/\/beta.next-finance.net\/en\/wp-json\/wp\/v2\/tags?post=84623"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}