JPMorgan Asset Preparing for Emerging Stocks Rebound in 2nd Half

JPMorgan Asset Management, the investing arm of the largest U.S. bank, is preparing for a rebound in emerging-market equities in the second half of this year spurred by improved earnings.

JPMorgan Asset is buying Korean automaker shares hurt by investor concern that a weaker yen will limit their ability to compete against Japanese exporters,Richard Titherington, chief investment officer and head of emerging markets, said in an interview yesterday. The company favors consumer discretionary stocks with “very low valuations” and has its biggest overweight position in China, he said yesterday.

“A strong recovery in the second half” for emerging market equities will “significantly close the gap” with developed-nation shares, said Titherington, who manages $47 billion in emerging-market stocks. “We’ve entered some of the Korean auto companies where the share prices have fallen sharply when the yen has weakened” on expectation “that’s a temporary headwind,” he said.

The benchmark MSCI Emerging Markets Index (MXEF) has dropped 2.5 percent this year, lagging behind an 8.8 percent surge in the MSCI World Index (MXWO) of advanced-country stocks, as 58 percent of developing-nation companies reported worse fourth quarter earnings than estimated by analysts, according to data compiled by Bloomberg.

Hyundai Motor Co. (005380), South Korea’s biggest automaker, extended its decline to 8 percent this year as the Japanese yen reached its weakest level versus the dollar since April 2009 yesterday.

“The yen is around fair value now, so I would expect this headwind to reverse in the second half of the year,” Titherington said.

To contact the reporter on this story: Maria Levitov in London at mlevitov@bloomberg.net

To contact the editor responsible for this story: Gavin Serkin at gserkin@bloomberg.net

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