China best BRIC to emerge from slump: Schroders

Tue Mar 17, 2009 12:31pm EDT
By Jeremy Gaunt, European Investment Correspondent
LUXEMBOURG (Reuters) - China is best placed among major emerging markets to rebound from the global slump, but the so-called BRICs in general have a better medium-term outlook than developed markets, UK fund manager Schroders believes.
Speaking to Reuters in London last week, fund manager Waj Hashimi said his Brazil, Russia, India and China (BRICs) fund was cautious about the short term, but saw little in the future to detract from what has been a major investment play.
"BRICs look medium term better than developed," he said. "Longer-term, we know it is a strong theme."
The industrialisation of China and India alone is bringing the world's two most populated countries into the global economy, he said.
Hashimi manages the Schroder International Selection Fund-BRIC with Allan Conway. It was ranked top performer in its class at fund researcher Lipper's European awards on Tuesday.The fund aims to get around 20 percent of its returns from country allocation and 80 percent from stock selection.
It is currently overweight China, neutral on Russia and underweight both India and Brazil.Hashimi said China's economy and growth prospects, even with the recent slump, were favourable to weathering the storm and Chinese stock valuations were relatively attractive.He was neutral on Russia because of a combination of strains on the banking system and the lower oil price. But he saw some signs that there were still opportunities.
"Russia will slow down a lot ... but valuations more than discount that," Hashmi said.
The difficulties facing India and Brazil were different. The former was a relatively closed economy, which could protect it from some of the harder hits of the slumping global economy.But it was in a weak fiscal position, he said.
Brazil was very tied to the future of commodity prices, which have been taking a large hit as global demand has waned.
It says something for the misery that many equity markets went through last year, meanwhile, that Schroders' data shows it won the Lipper award despite losing 42.1 percent over 2008 in its sterling-denominated fund.
This was, however, a 2.7 percent outperformance against its MSCI benchmark.(To read Reuters Global Investing Blog click here; for the MacroScope Blog click on blogs.reuters.com/macroscope; for Hedge Fund Hub click on blogs.reuters.com/hedgehub)