Investments to Chase as Emerging Markets Head Into Trump’s World

  • Turkey’s Trump Towers, metal producers tipped to benefit
  • Russia, developing Europe likely to outperform peers

What's Driving the Selloff in Emerging Markets?

Donald Trump’s victory in U.S. presidential elections may be good news for investors who know where to look in the developing world.

The Turkish owner of Istanbul’s Trump Towers, Russian businesses brought in from the cold as relations thaw with Washington and Indian drugmakers freed from the threat of a pricing crackdown touted by Hillary Clinton are among their top picks.

"Uncertainty provides opportunity,” Mark Mobius, the executive chairman of Templeton Emerging Markets Group, said by phone from Dubai. “With Trump coming, we haven’t pulled back on our buying."

Here are some of the investments that may emerge as winners from a Trump presidency:

Russia

  • Trump’s pledge to improve relations with Russia may lead to easing of international sanctions imposed after the country annexed Crimea in 2014. That will allow "Russian businesses to more easily finance themselves,” said Michael Levy, emerging-market investment director at Barings Plc in London, which oversees about $35 billion.
  • Russia’s Micex index of stocks has risen about 4 percent over three days, compared with a drop of 5 percent for the MSCI Emerging Markets Index. The ruble will probably beat counterparts in the region, according to Societe Generale SA’s London-based strategist Phoenix Kalen.

Turkish Conglomerate

  • Dogan Sirketler Grubu Holding AS, a company with stakes in industries from insurance to energy and broadcasting, owns two towers with Trump’s name on them in Istanbul. Investors are speculating that the company, owned by Turkish billionaire and media mogul Aydin Dogan, may now be more sheltered from an ever-widening political crackdown in Turkey because of its link to the U.S. president-elect, according to Haydar Acun, the managing partner at Istanbul-based Marmara Capital.
  • The holding company surged as much as 16 percent on Wednesday to a one-month high before slipping 4.8 percent over the next two days.

Indian Drugmakers

  • Indian pharmaceutical companies, collectively the second-biggest suppliers of generic medicines to the U.S., are among the worst-performing stocks in Mumbai this year as the Department of Justice probed the industry for price collusion. Hillary Clinton had criticized ballooning charges for medicines during her unsuccessful bid for the White House.
  • Sun Pharmaceutical Industries Ltd., which received a subpoena from the DOJ over drug pricing, rose 4 percent on Wednesday, the most since May 27. Drugmakers with the biggest exposure to the U.S. "could be winners," said Hertta Alava, head of emerging markets at FIM Asset Management in Helsinki, who is looking to add individual stocks on Trump’s victory.

Metal Producers

  • Metal prices have surged since the election, sending copper up to a 16-month high on speculation Trump will fulfill his pledge to increase spending on infrastructure. Trump’s victory has prompted "metal-price euphoria around the globe," according to Andrey Lobazov, a strategist at Aton LLC in Moscow.
  • South Korean steelmaker Posco and Brazil’s Vale SA both surged more than 5 percent on Thursday.

Developing Europe

  • Closer trade ties with Europe help insulate these countries from a more protectionist U.S. president, according to Raiffeisen Bank International AG and Rabobank. Nomura International Plc included Hungarian assets in a "positive bucket" of investments that may outperform. Franklin Templeton Investments said Poland is “relatively protected” from fallout if Trump carries through with pledges to cut trade.
  • Poland’s zloty and Hungary’s forint have dropped about 0.8 percent in the last two days against the euro, compared with about 5 percent for the Brazilian real and 10 percent for the Mexican peso.

Egypt

  • Egypt floated the pound this month, prompting a 50 percent currency depreciation and removing one of the biggest disincentives to investing in the country. President Abdel-Fattah El-Sisi, seeking closer ties to the U.S., was among the first world leaders to congratulate Trump. Egypt has the cheapest currency in emerging markets, "with much higher interest rate support,” said Charles Robertson, Renaissance Capital’s global chief economist in London.
  • The pound gained 3.5 percent on Thursday after the country secured $2 billion in loans from international banks as the International Monetary Fund considers a $12 billion bailout. Stocks have risen 21 percent this week, making them the second-best performers worldwide.
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