Whether there will be a soft or hard landing in emerging markets as policy makers attempt to push down inflation is one of the biggest investment stories of our time, but analysts at Societe Generale in Paris believe whatever the outcome, investors can benefit from emerging market growth via holding European companies.
“While corporate profit growth remains emerging market driven, exposure to these regions is no longer a positive catalyst for sector performance,” said Claudia Panseri from the European equities strategy team at Socgen in Paris in a research note.
“However, we believe that the combination of peaking US indicators, better-than-expected emerging market news flow and FX fluctuations should reverse this situation and favour the most emerging market exposed sectors.”
“Within our universe, we particularly like stocks in the Machinery, Industrial Conglomerates and Metals & Mining sectors as they all rank highly under our value score,” said Panseri
In order to pick out the stocks you should hold, Panseri and her team set out criteria that helped them isolate a number of stocks from the DJ Stoxx 600 that would benefit from emerging market growth.
Stocks needed to have significant exposure to emerging markets like Asia, Africa, Eastern Europe or Latin America with at least 15 percent of their 2010 sales being made in those markets. Given Panseri’s fears over the US dollar, she also looked for firms that had less exposure to the US than to emerging markets. The stocks also needed to be negative year to date relative to the MSCI Europe Index, be expected to have EPS growth this year and next and have either a buy or hold rating from SG.
Gold is one of the largest financial assets in the world with an average daily trading volume of $183 billion, and its value has seen explosive growth in recent years. At the start of 2000, gold was priced at just $460 per ounce when adjusted for inflation. By August 2021, that number had ballooned to roughly $1,815 per ounce. But not all investors are in love with gold. Warren Buffett has spoken out numerous times on his doubts, calling it an asset with “no utility.” “It doesn’t produce anything and that’s why from a long-term perspective, it’s a hard asset to invest in,” Odyssey Capital Advisors chief investment officer Jason Snipe said. “It’s prudent portfolio management to have maybe a small allocation there but this is not an asset that you want to be heavily entrenched into if you’re looking for long-term yield.” Since 2011, the S&P 500 has returned more than 16% on an annualized basis. The annualized return for the 10-year Treasury note sat at just over 2% in that time period. Gold, meanwhile, has fallen slightly over the past 10 years. “Early on, you see strong performance, strong return or yield from commodities such as gold. Generally, as we move into a different cycle, gold is not as great a performer as we move into a normalized environment,” Snipe said. Whether gold is an effective hedge against market volatility is also widely debated among experts. “Gold is not necessarily a perfect hedge against inflation but it can be a stra…
The top ten picks under these criteria in Europe are: Standard Chartered, Anglo American, BHP Billiton, Antofagasta, Bourbon, Holcim, Atlas Copco, Richemont, Hochtief and Inchcape.