WEBVTT - Thornburg's Wilson on Opportunities in Emerging Markets (Audio)

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<v Speaker 1>Global business news twenty four hours a day. If Bloomberg

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<v Speaker 1>This is a Bloomberg Business flash. Broom, Bloomberg World Handquarters.

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<v Speaker 1>I'm Charlie Pellett's stock's edge higher, holding close to our

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<v Speaker 1>record SMP up six six Again, there are three tens

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<v Speaker 1>of one percent. Dow Industrial is also up three tenths

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<v Speaker 1>of one percent. Gold up ninety the ounce hired by

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<v Speaker 1>two percent. West Texas Intermediac crued up nine tenths of

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<v Speaker 1>one percent. I'm Charlie Pellett. That's a Bloomberg business flash.

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<v Speaker 1>You're listening to taking Stock with Kathleen Hays and Pim

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<v Speaker 1>Box on Bloomberg Radio. Back in July, a black Rock

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<v Speaker 1>money manager Sergio trego Pas, ahead of emerging market debt

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<v Speaker 1>at black Rock, said in a Bloomberg television interview well

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<v Speaker 1>that there was a great migration that investors should pour

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<v Speaker 1>into emerging market debt. Well, now the advice is be selected.

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<v Speaker 1>Just yesterday he said that investors need to exercise caution

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<v Speaker 1>or face being caught in a sell off. Is sentiment

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<v Speaker 1>suddenly shifts Here to tell us more is Charlie Wilson.

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<v Speaker 1>He is portfolio manager and Managing director and co manager

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<v Speaker 1>of the Developing World Fund, and the Developing World Fund

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<v Speaker 1>has uh produced a return of a little bit more

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<v Speaker 1>than twelve percent so far this year, and he joins

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<v Speaker 1>us in our studio. Charlie, thanks very much for being here,

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<v Speaker 1>Thanks for having me. What is the mandate of the

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<v Speaker 1>Developing World Fund? Our focus is to provide our investors

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<v Speaker 1>opportunities and emerging markets through both companies that are dom

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<v Speaker 1>missiled and emerging markets, but also maybe dom missiled elsewhere

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<v Speaker 1>such as in the US or Europe. And so you're

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<v Speaker 1>focused on equities, which is some very different from looking

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<v Speaker 1>at emerging market debt and very important that your view

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<v Speaker 1>is that now at a time when the macro, what's

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<v Speaker 1>the FED going to do? In fact, what's the Bank

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<v Speaker 1>of Japan? But typically the Fed, Fed's gonna high grate

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<v Speaker 1>some eagin markets sell off, They're not going to high

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<v Speaker 1>create emerging markets do better. But you're saying, okay, let's

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<v Speaker 1>look at domestic reform agendas, find specific stories. Mexico is

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<v Speaker 1>one of your examples. Why Yeah, Well, if you look

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<v Speaker 1>since the beginning of the year, emerging markets equities are

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<v Speaker 1>up over and from the bottom in January nearly. So

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<v Speaker 1>at this point we need to see underlying earnings flow through,

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<v Speaker 1>and so we're trying to be UH, we're trying to

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<v Speaker 1>focus on areas where we're seeing positive developments. One of

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<v Speaker 1>the areas where we're seeing that are through the stories

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<v Speaker 1>driven by reform agendas. For example, in Mexico, we've seen

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<v Speaker 1>h subdued inflation over the last couple of years after

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<v Speaker 1>we've seen reform around H the telecoma industry pricing, for example,

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<v Speaker 1>which has helped us for real income growth and drive earnings. UH.

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<v Speaker 1>Surprises in the consumer sector, particularly out of companies like

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<v Speaker 1>Walmex and Oxo. Tell us about China because I noticed

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<v Speaker 1>that two of your large holdings, one is a life

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<v Speaker 1>insurance company in China and the other is the Shanghai

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<v Speaker 1>International Airport. How did you find these two particular stocks. Yeah, well,

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<v Speaker 1>those are a part of two themes that we really like.

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<v Speaker 1>One is increasing healthcare penetration throughout Asia. We have healthcare

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<v Speaker 1>investments both in the hospital side as well as a

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<v Speaker 1>life insurance life insurance side in multiple countries. And then

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<v Speaker 1>the other thing is increased outbound travel from China to

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<v Speaker 1>other countries. UH. We've invested in that theme through not

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<v Speaker 1>only directly through the airports, but also through tourists driven

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<v Speaker 1>themes like Korean cosmetics companies as well. So how do

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<v Speaker 1>you go about what's your methodology when you're looking at

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<v Speaker 1>companies our countries, emerging market companies, and then do you

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<v Speaker 1>start with who's got the best domestic reforma genda? Or

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<v Speaker 1>do you go in and say, look, I think maybe

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<v Speaker 1>I liked this company and it's so and find out

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<v Speaker 1>what supports it. Yeah, you know, obviously it takes a

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<v Speaker 1>little bit of both, but primarily we're focused on company

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<v Speaker 1>fundamental so we're bottom up focused investors. What we try

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<v Speaker 1>to do is look for opportunities that have a multi

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<v Speaker 1>year angle to them, and right now, after quite a run,

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<v Speaker 1>we're having to be a little bit more selective, and

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<v Speaker 1>as I mentioned, we are finding opportunities with those reform

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<v Speaker 1>driven stories. What I think is, what I think is

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<v Speaker 1>interesting is that you've been given an opportunity some some

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<v Speaker 1>of these countries have been given an opportunity where they've

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<v Speaker 1>been forced to really address their fiscal deficits, which is

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<v Speaker 1>leading to lower inflation over the longer term, and it's

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<v Speaker 1>creating opportunities for us that are fundamentally driven investors to

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<v Speaker 1>find good long term stories. Well, one of your stories

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<v Speaker 1>is Hong Kong Exchanges and clearing investing in overseas exchanges. Uh,

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<v Speaker 1>what was the uh impetus to make that investment. Yeah,

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<v Speaker 1>we really like a story companies that have dominant market positions,

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<v Speaker 1>and obviously Hong Kong Exchange is an important financial center

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<v Speaker 1>for the Chinese government, especially as they try to internationalize

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<v Speaker 1>their capital markets. We think that a share inclusion ultimately

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<v Speaker 1>will drive more international investor interest and bring capital flow

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<v Speaker 1>via Hong Kong to the mainland. And uh, the Chinese

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<v Speaker 1>government will see Hong Kong Exchanges an important partner in

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<v Speaker 1>that process. China G twenty just met there. There's so

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<v Speaker 1>much there's so many issues around each China domestic reform agenda.

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<v Speaker 1>There's pollution they're trying to clean up, the big shift

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<v Speaker 1>of course from export like growth of consumer driven and

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<v Speaker 1>all the complications and opportunities there. What's your story for China, Well,

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<v Speaker 1>just on the G twenty specifically, I feel like that

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<v Speaker 1>you know, as you get with most of these events,

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<v Speaker 1>there's a there was a lot of hype, not necessarily

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<v Speaker 1>a lot of substance immediately. But one thing that I

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<v Speaker 1>do think that it highlighted was the fact that we

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<v Speaker 1>have slow economic growth globally. We're seeing an increase in

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<v Speaker 1>protectionism or focus on policies designed to to provide trade barriers,

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<v Speaker 1>and I think that the G twenty was right to

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<v Speaker 1>address some of those issues. Um. I think China in

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<v Speaker 1>particular has suffered from slowing growth due to the fact

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<v Speaker 1>that the global export demand on global trade demand has

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<v Speaker 1>been weaker than last decade, and that's hurt their export economy.

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<v Speaker 1>Now you're mentioning cosmetics, and I know that that had

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<v Speaker 1>to do with Korea and the company is called a

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<v Speaker 1>more Pacific correct. Yes, yeah, how did you stumble upon this?

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<v Speaker 1>I mean, where did you find this? Well? Frankly, um,

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<v Speaker 1>my wife was probably the leader in this research. Um,

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<v Speaker 1>you know she she I was aware of the company

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<v Speaker 1>as a Korean blue chef, but um, but she actually

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<v Speaker 1>highlighted the quality of the products and helped me to

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<v Speaker 1>understand the international opportunity. And that's for a more a

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<v Speaker 1>over the next couple of years, it's less about Korea,

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<v Speaker 1>but the fact that it's becoming a global brand. And

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<v Speaker 1>the most recent quarter a moore a sales in China

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<v Speaker 1>were up sixty year over year, and they're starting to

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<v Speaker 1>see an acceleration and growth in other markets like the US.

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<v Speaker 1>Just a quick comment on India. Who do you like

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<v Speaker 1>there and why? Well? I think UH in India that's

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<v Speaker 1>one of the most under penetrated UH markets from a

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<v Speaker 1>data consumption perspective, and so while the landscape around the

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<v Speaker 1>data infrastructure on at the telecom side is still maybe

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<v Speaker 1>a little bit uncertain UM, one of the companies that

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<v Speaker 1>we've liked for a while and help for a while

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<v Speaker 1>is Z Entertainment, which is benefiting from the proliferation of

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<v Speaker 1>content availability. All right, Charlie Wilson, you have to come

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<v Speaker 1>back soon. Lots of good ideas based on how governments

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<v Speaker 1>are changing their economists and their business models. Supportfolio Manager

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<v Speaker 1>Managing Director co manager of the Developing World Fund at

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<v Speaker 1>Thornburg Investment Management. I'm Kathleen Hayes along with pim Fox.

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