Location
Please select your investor type by clicking on a box:
We are unable to market if your country is not listed.
You may only access the public pages of our website.
EM equity investing: Going where the value is
Laurence Bensafi, Portfolio Manager & Deputy Head of EM Equities, looks at the stories behind the current valuations of four emerging market economies – India, Vietnam, Indonesia and South Africa.
India has always been one of the more expensive countries in our emerging markets universe, as it has a greater number of high-quality stocks and a strong structural growth story, however, over the past year, it has become increasingly expensive. In our view, India deserves to trade at a premium, but the rich valuations and high expectations remind us to be extra mindful and disciplined when it comes to valuation.
The most over-valued areas are the small and mid-cap segments of the Indian equity market, as well as companies in some of the more government-sensitive sectors. However, it is certainly possible to find reasonably valued Indian equities, and there are large divergences in valuations from sector to sector, and even between companies. In particular, within financials, IT services, and pharma, we see companies that are relatively valued, with quality management and operations.
Looking across to southeast Asia, Vietnam has faced difficulties in recent years, driven by a deterioration in its property market, and a sudden shortage of liquidity due to anti-corruption crackdowns and regulatory reforms of the corporate bond market. The market is volatile and de-rated, meaning that foreign investors need to be cautious. However, from a valuation perspective, Vietnam looks interesting. It experienced 6.4% growth in gross GDP year-on-year in the first half of 20241, showing strong economic performance. The country functions as a great hub for Asia in terms of outsourcing, and it has benefitted from shifts in global supply chains over the last few years. It is becoming a new manufacturing hub, attracting increasing amounts of foreign investment from global companies such as Apple, Samsung, and Intel. Supply chain relocations from China to Vietnam are still concentrated in low value-added production, such as final assembly, where Vietnam has a comparative advantage with its lower labour costs.
We believe that Indonesia also has strong investment potential, as one of the fastest growing and strongest economies, not only in southeast Asia but also in emerging markets. It has a diversified economy and is blessed with a wealth of natural resources, notably coal, nickel and copper. Both domestic consumption (53% of GDP) and exports of downstream commodities products are helping to generate a strong current account. At the same time, Indonesia is in the middle of a political transition, and there are some concerns on the fiscal side. This has led to a sell-off, making the market interesting to us, as value investors.
Finally, one market that has fallen out of favour in recent years is South Africa. However, following a surprise election result earlier this summer, which led to the new Government of National Unity (the GNU), the country’s fundamentals are improving. Positioning is also low, meaning that there is a lot for value investors to discuss. Between the resolution of ongoing power issues in the country and the improving quality of corporates, South Africa is becoming an interesting market once again.
As long-term equity investors, we understand the need to be selective and to recognise that the world is constantly changing. Our research suggests that management quality can make a significant difference to the performance of a company and its ability to navigate challenging market conditions. Across our universe, it is therefore important to evaluate company management as a core part of our investment process and to focus on companies with durable business practices that are able to achieve sustainable, long-term returns.
1 Vietnam economy in H1 2024: strong performance in key indicators (vietnam-briefing.com).
Sign up for insights by email
Subscribe now to receive the latest investment and economic insights from our experts, sent straight to your inbox.
This document is a marketing communication and it may be produced and issued by the following entities: in the European Economic Area (EEA), by BlueBay Funds Management Company S.A. (BBFM S.A.), which is regulated by the Commission de Surveillance du Secteur Financier (CSSF). In Germany, Italy, Spain and Netherlands the BBFM S.A is operating under a branch passport pursuant to the Undertakings for Collective Investment in Transferable Securities Directive (2009/65/EC) and the Alternative Investment Fund Managers Directive (2011/61/EU). In the United Kingdom (UK) by RBC Global Asset Management (UK) Limited (RBC GAM UK), which is authorised and regulated by the UK Financial Conduct Authority (FCA), registered with the US Securities and Exchange Commission (SEC) and a member of the National Futures Association (NFA) as authorised by the US Commodity Futures Trading Commission (CFTC). In Switzerland, by BlueBay Asset Management AG where the Representative and Paying Agent is BNP Paribas Securities Services, Paris, succursale de Zurich, Selnaustrasse 16, 8002 Zurich, Switzerland. The place of performance is at the registered office of the Representative. The courts at the registered office of the Swiss representative or at the registered office or place of residence of the investor shall have jurisdiction pertaining to claims in connection with the offering and/or advertising of shares in Switzerland. The Prospectus, the Key Investor Information Documents (KIIDs), the Packaged Retail and Insurance-based Investment Products - Key Information Documents (PRIIPs KID), where applicable, the Articles of Incorporation and any other document required, such as the Annual and Semi-Annual Reports, may be obtained free of charge from the Representative in Switzerland. In Japan, by BlueBay Asset Management International Limited which is registered with the Kanto Local Finance Bureau of Ministry of Finance, Japan. In Asia, by RBC Global Asset Management (Asia) Limited, which is registered with the Securities and Futures Commission (SFC) in Hong Kong. In Australia, RBC GAM UK is exempt from the requirement to hold an Australian financial services license under the Corporations Act in respect of financial services as it is regulated by the FCA under the laws of the UK which differ from Australian laws. In Canada, by RBC Global Asset Management Inc. (including PH&N Institutional) which is regulated by each provincial and territorial securities commission with which it is registered. RBC GAM UK is not registered under securities laws and is relying on the international dealer exemption under applicable provincial securities legislation, which permits RBC GAM UK to carry out certain specified dealer activities for those Canadian residents that qualify as "a Canadian permitted client”, as such term is defined under applicable securities legislation. In the United States, by RBC Global Asset Management (U.S.) Inc. ("RBC GAM-US"), an SEC registered investment adviser. The entities noted above are collectively referred to as “RBC BlueBay” within this document. The registrations and memberships noted should not be interpreted as an endorsement or approval of RBC BlueBay by the respective licensing or registering authorities. Not all products, services or investments described herein are available in all jurisdictions and some are available on a limited basis only, due to local regulatory and legal requirements.
This document is intended only for “Professional Clients” and “Eligible Counterparties” (as defined by the Markets in Financial Instruments Directive (“MiFID”) or the FCA); or in Switzerland for “Qualified Investors”, as defined in Article 10 of the Swiss Collective Investment Schemes Act and its implementing ordinance, or in the US by “Accredited Investors” (as defined in the Securities Act of 1933) or “Qualified Purchasers” (as defined in the Investment Company Act of 1940) as applicable and should not be relied upon by any other category of customer.
Unless otherwise stated, all data has been sourced by RBC BlueBay. To the best of RBC BlueBay’s knowledge and belief this document is true and accurate at the date hereof. RBC BlueBay makes no express or implied warranties or representations with respect to the information contained in this document and hereby expressly disclaim all warranties of accuracy, completeness or fitness for a particular purpose. Opinions and estimates constitute our judgment and are subject to change without notice. RBC BlueBay does not provide investment or other advice and nothing in this document constitutes any advice, nor should be interpreted as such. This document does not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product in any jurisdiction and is for information purposes only.
No part of this document may be reproduced, redistributed or passed on, directly or indirectly, to any other person or published, in whole or in part, for any purpose in any manner without the prior written permission of RBC BlueBay. Copyright 2023 © RBC BlueBay. RBC Global Asset Management (RBC GAM) is the asset management division of Royal Bank of Canada (RBC) which includes RBC Global Asset Management (U.S.) Inc. (RBC GAM-US), RBC Global Asset Management Inc., RBC Global Asset Management (UK) Limited and RBC Global Asset Management (Asia) Limited, which are separate, but affiliated corporate entities. ® / Registered trademark(s) of Royal Bank of Canada and BlueBay Asset Management (Services) Ltd. Used under licence. BlueBay Funds Management Company S.A., registered office 4, Boulevard Royal L-2449 Luxembourg, company registered in Luxembourg number B88445. RBC Global Asset Management (UK) Limited, registered office 100 Bishopsgate, London EC2N 4AA, registered in England and Wales number 03647343. All rights reserved.
Sign up for insights by email
Subscribe now to receive the latest investment and economic insights from our experts, sent straight to your inbox.