In the years to come, investors will look at opportunities where growth is highest, where population growth is highest, urbanisation and industrialisation is highest and where the ability to finance is good," said Dr Ghadir Abu Leil-Cooper, Head of Emea Equities, Baring Asset Management, a firm that provides services in developed and emerging equity and bond markets on behalf of institutional, retail and private clients worldwide. With more than half of its $44.7 billion (Dh164.18bn) assets under management in emerging markets and Asian equities, the company plans to continue focusing on these markets while the Middle East and North Africa (Mena) will be a key area, she told Emirates Business. "Emerging markets is a long-term story," said Leil-Cooper, describing the concerns of overheating as "short-term".
Barings has a strong presence in emerging markets. Which areas within these markets do you plan to focus on?
Barings has a strong presence in emerging markets. Which areas within these markets do you plan to focus on?
We have one of the largest Hong Kong China funds, one of the largest funds focused on Eastern Europe, global Emerging Market (EM) funds and regional funds focused on Latin America. Within that focus on EM, we are looking at the next areas of focus. This is where the Mena comes in – this is one of the areas we want to invest in as it exhibits very attractive opportunities.
What kind of AUM (assets under management) do you have in emerging markets?
We have £27.9bn (Dh151.71bn) in assets, nine per cent in Mena. But there are rising concerns about overheating in EM economies such as China. Here, we need to distinguish between short term and long term. There are periods in any market where, in the short term, the market can over-excel itself – maybe you can talk about over-valuation. We don't believe that is the case with emerging markets. That is a long-term story. This is where you move to the East. This is the whole investment story of urbanisation and industrialisation. The world has just started to look at emerging markets as a destination. If you look at pension plans, for instance, emerging markets have less than one per cent of global assets. In terms of people's assets invested in these markets, the number is very small. So we have long periods where demand for emerging equities will continue as they are under-represented [at the moment].
Does it mean the coming years will see more emphasis on emerging markets compared to developed ones? What is your view of Mena markets?
We are already there. I think what would happen is that in the coming years, investors will look at opportunities in growth that is highest, where population growth is highest, urbanisation and industrialisation is highest and where ability to finance is good. In the West, we have indebted consumers, an ageing population, indebted governments. Now, we are quite positive on Mena markets. This is the area where we have a young population with very good population growth, hence more consumption. The growth in Mena would be 2.3 to 2.5 per cent in the next one to two decades. You have to look at areas that will exhibit higher growth. The factors are domestic and external demand. External demand comes from oil, when you have emerging markets developing fast, the consumption would be higher. China, for example, is the highest taker of Saudi oil.
The region is expected to have more money coming in from oil, and that money will be used to invest for the future of the region, as it boasts one of the highest population growths globally. More than 70 per cent of the population is below 30 years – the median age in Algeria and Tunisia is 25 years. This population will need housing, cars etc. This is another avenue for growth to do with consumption. Besides, this population does not have much debt. Here, private credit as a percentage of the gross domestic product is very low. Contrast it with the West, where highly indebted people will spend a lot on reducing their debt.
What is the growth you are looking at in your AUM in 2010?
We wouldn't make any predictions. There would be a strong trend, a significant interest in emerging markets.
In the GCC, which would be your preferred markets?
We look at investments with growth at reasonable prices. So our preference has changed, depending on how markets change. At the moment, we like the Saudi story. We like Egypt, Dubai and Abu Dhabi because of valuations having corrected so much. We like companies in Qatar, Turkey. We are not sector specific; we are more company specific. Within the same sector, we might like some companies and might not like some others.
