Magazine article Global Finance

Born and Bred in Emerging Markets

Magazine article Global Finance

Born and Bred in Emerging Markets

Article excerpt

Global Finance sat down with José Gerardo Morales, the chief investment officer-US and Eastern Europe, Middle East and Africa-for Mirae Asset Global Investments (USA), to discuss challenges and opportunities in emerging markets, and the state of geopolitical risk in 2015.

Global Finance: What are the main investment themes and challenges In 2015 for emerging markets?

José Gerardo Morales: Global growth is improving but remains pretty fragile-3.5% growth for this year-and emerging markets still remain an important part of this growth. Its share of global GDP is rising. But the gap between level of growth in emerging markets and that of developed markets is shrinking. The IMF itself earlier this year downgraded growth for emerging markets.

The stronger dollar is negative for commodity producers because it puts pressure on commodity prices. It also puts pressure on countries with large current-account deficits, and [on] those countries that have high levels of foreign exchange debt: [Emerging markets] corporations tripled the foreign exchange debt that they have taken on in the last 10 years, especially in Asia. [However], the strong dollar helps the vast majority of emerging markets [as it] supports consumption and provides lower inflation for these countries. That, in turn, gives them policy flexibility. Geopolitical risk remains high.

OF: What is your invast moot process?

Morales: It is a bottom-up strategy. I look at a company and focus mainly on its operations, financials, cash flow, and if it gives me the exposure to secular growth I am looking for. We look at the macro for risk management. The macro risk can be so high due to politics or currency that we avoid [a country] or reduce exposure. For example, we will not invest in Venezuela. Argentina was on this list until recendy. India [in contrast] is the proxy now for improving sustainable growth. …

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