Posted by: changholt | June 17, 2011

Growth expected to continue in emerging markets

This is the sound of an emerging market economy that seems destined to put up at least 5 percent annually thanks to demographics and an improving living standard.

A clear beneficiary of all this is Tata Motors Ltd. (TTM on the NYSE), the country’s largest automobile manufacturer, whose American Depositary shares rose 72 percent in 2010 following their 279 percent rise in 2009.

This company of 24,000 employees that was established in 1945 has placed millions of its cars and trucks on India’s roads. In 2008, it acquired Jaguar-Land Rover from Ford for $2.3 billion and launched its Tata Nano.

India is definitely a good story in the long run, and the only real issue there is that investors are currently paying too much for its growth,” says Arjun Jayaraman, portfolio manager of Causeway Emerging Markets Investor Fund (CEMVX) in Los Angeles.

Booming economic results in emerging markets, as developed markets try to pull themselves out of recession, will likely be the continuing scenario of 2011.

Emerging markets mutual funds were up 17 percent in 2010, according to Lipper Inc., with a five-year annualized return of 10 percent and 10-year annualized return of 15 percent. While the average U.S. diversified equity fund was also up 17 percent in 2010, its five-year and 10-year annualized returns are each a meager 3 percent.

“The emerging markets group is growing faster than the developed markets, but you need broad diversification because the leadership changes year to year,” explained Jayaraman, whose fund was up 24 percent in 2010. “For example, small-country markets such as Indonesia, Thailand and Chile did better than the BRIC (Brazil, Russia, India and China) countries during 2010.”

Some of his Causeway fund’s largest holdings are South Korea’s Samsung Electronics Co. Ltd., China Mobile Ltd. (traded here as CHL, an American Depositary Receipt), Russian natural gas producer OAO Gazprom (OGZPY.PK, an ADR), Polish copper and silver producer KGHM Polska Miedz S.A., Indian aluminum and copper producer Hindalco Industries Ltd., and Brazilian diversified mining company Vale S.A. (VALE, an ADR).

“We’re looking for 6.2 percent gross domestic product growth in the emerging markets in 2011 versus 2 percent for the developed markets,” said Alec Young, international equity strategist with Standard & Poor’s Corp. in New York.

via Growth expected to continue in emerging markets | Richmond Times-Dispatch.


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