Emerging-market stocks will beat their developed peers this year after the biggest underperformance since 1998, said John Chisholm, chief investment officer at Acadian Asset Management.
“It’s not that emerging markets will necessarily have a great year, but they are likely to do a little better than developed markets in 2014,” Chisholm, who helps manage $65 billion at Boston-based Acadian, said in an interview today at Bloomberg’s headquarters in New York. “We still look at 5 percent plus GDP growth in aggregate for emerging markets.”
The Acadian Emerging Markets Portfolio has returned 16 percent over the last five years, beating 77 percent of peers, according to data compiled by Bloomberg.
The International Monetary Fund kept its gross domestic product expansion forecast for developing countries this year at 5.1 percent on Jan. 21, higher than the 2.2 percent growth predicted for advanced economies. Mark Mobius, chairman of Templeton Emerging Markets Group, said inflows into developing nations will resume later in 2014 following a selloff triggered by the Federal Reserve tapering monetary stimulus.
The iShares MSCI Emerging Markets Index exchange-traded fund declined to a five-month low today after the Fed pressed on with a reduction in economic stimulus amid a selloff in developing-nation currencies. The Fed will trim its monthly bond buying by $10 billion to $65 billion, sticking to its plan for a gradual withdrawal of stimulus from departing Chairman Ben S. Bernanke’s unprecedented easing policy.
South Africa’s rand drove a rout in currencies after the nation unexpectedly increased its benchmark rate, joining other emerging-market central banks from Turkey to Brazil and India that tightened policy to bolster their currencies.
“What the central banks are doing right now will not solve the problem,” Wayne Lin, a portfolio manager at Baltimore-based Legg Mason Inc., which oversees $680 billion, said by phone. “They’re helping their currencies in the short term, but hurting the economy in the long term. Such measures only work when you have the flexibility in your economy, and a lot of emerging markets don’t.”
South Korea and Taiwan are Acadian’s favorite emerging markets, because of “cheap” electronic companies such as Samsung Electronics Co., while consumer stocks in developing nations have become too expensive, according to Chisholm.
The MSCI Emerging-Market Index equity gauge declined 5 percent last year, compared with a 24 percent rally in the MSCI World Index, the biggest underperformance since 1998, according to data compiled by Bloomberg.