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

one percent. I'm Charlie Pellett. That's a Bloomberg business flash. You're listening to taking Stock with Kathleen Hays and Pim Box on Bloomberg Radio. Back in July, a black Rock money manager Sergio trego Pas, ahead of emerging market debt at black Rock, said in a Bloomberg television interview well that there was a great migration that investors should pour into emerging market debt. Well, now the advice is be selected. Just yesterday he said that investors need to exercise caution

or face being caught in a sell off. Is sentiment suddenly shifts Here to tell us more is Charlie Wilson. He is portfolio manager and Managing director and co manager of the Developing World Fund, and the Developing World Fund has uh produced a return of a little bit more than twelve percent so far this year, and he joins us in our studio. Charlie, thanks very much for being here, Thanks for having me. What is the mandate of the

Developing World Fund? Our focus is to provide our investors opportunities and emerging markets through both companies that are dom missiled and emerging markets, but also maybe dom missiled elsewhere such as in the US or Europe. And so you're focused on equities, which is some very different from looking at emerging market debt and very important that your view is that now at a time when the macro, what's the FED going to do? In fact, what's the Bank

of Japan? But typically the Fed, Fed's gonna high grate some eagin markets sell off, They're not going to high create emerging markets do better. But you're saying, okay, let's look at domestic reform agendas, find specific stories. Mexico is one of your examples. Why Yeah, Well, if you look since the beginning of the year, emerging markets equities are

up over and from the bottom in January nearly. So at this point we need to see underlying earnings flow through, and so we're trying to be UH, we're trying to focus on areas where we're seeing positive developments. One of the areas where we're seeing that are through the stories driven by reform agendas. For example, in Mexico, we've seen h subdued inflation over the last couple of years after we've seen reform around H the telecoma industry pricing, for example,

which has helped us for real income growth and drive earnings. UH. Surprises in the consumer sector, particularly out of companies like Walmex and Oxo. Tell us about China because I noticed that two of your large holdings, one is a life insurance company in China and the other is the Shanghai International Airport. How did you find these two particular stocks. Yeah, well, those are a part of two themes that we really like.

One is increasing healthcare penetration throughout Asia. We have healthcare investments both in the hospital side as well as a life insurance life insurance side in multiple countries. And then the other thing is increased outbound travel from China to other countries. UH. We've invested in that theme through not only directly through the airports, but also through tourists driven

themes like Korean cosmetics companies as well. So how do you go about what's your methodology when you're looking at companies our countries, emerging market companies, and then do you start with who's got the best domestic reforma genda? Or do you go in and say, look, I think maybe I liked this company and it's so and find out what supports it. Yeah, you know, obviously it takes a little bit of both, but primarily we're focused on company

fundamental so we're bottom up focused investors. What we try to do is look for opportunities that have a multi year angle to them, and right now, after quite a run, we're having to be a little bit more selective, and as I mentioned, we are finding opportunities with those reform

driven stories. What I think is, what I think is interesting is that you've been given an opportunity some some of these countries have been given an opportunity where they've been forced to really address their fiscal deficits, which is leading to lower inflation over the longer term, and it's creating opportunities for us that are fundamentally driven investors to find good long term stories. Well, one of your stories is Hong Kong Exchanges and clearing investing in overseas exchanges. Uh,

what was the uh impetus to make that investment. Yeah, we really like a story companies that have dominant market positions, and obviously Hong Kong Exchange is an important financial center for the Chinese government, especially as they try to internationalize their capital markets. We think that a share inclusion ultimately will drive more international investor interest and bring capital flow

via Hong Kong to the mainland. And uh, the Chinese government will see Hong Kong Exchanges an important partner in that process. China G twenty just met there. There's so much there's so many issues around each China domestic reform agenda. There's pollution they're trying to clean up, the big shift of course from export like growth of consumer driven and

all the complications and opportunities there. What's your story for China, Well, just on the G twenty specifically, I feel like that you know, as you get with most of these events, there's a there was a lot of hype, not necessarily a lot of substance immediately. But one thing that I do think that it highlighted was the fact that we

have slow economic growth globally. We're seeing an increase in protectionism or focus on policies designed to to provide trade barriers, and I think that the G twenty was right to address some of those issues. Um. I think China in particular has suffered from slowing growth due to the fact that the global export demand on global trade demand has been weaker than last decade, and that's hurt their export economy.

Now you're mentioning cosmetics, and I know that that had to do with Korea and the company is called a more Pacific correct. Yes, yeah, how did you stumble upon this? I mean, where did you find this? Well? Frankly, um, my wife was probably the leader in this research. Um, you know she she I was aware of the company as a Korean blue chef, but um, but she actually highlighted the quality of the products and helped me to

understand the international opportunity. And that's for a more a over the next couple of years, it's less about Korea, but the fact that it's becoming a global brand. And the most recent quarter a moore a sales in China were up sixty year over year, and they're starting to see an acceleration and growth in other markets like the US. Just a quick comment on India. Who do you like

there and why? Well? I think UH in India that's one of the most under penetrated UH markets from a data consumption perspective, and so while the landscape around the data infrastructure on at the telecom side is still maybe a little bit uncertain UM, one of the companies that we've liked for a while and help for a while is Z Entertainment, which is benefiting from the proliferation of content availability. All right, Charlie Wilson, you have to come

back soon. Lots of good ideas based on how governments are changing their economists and their business models. Supportfolio Manager Managing Director co manager of the Developing World Fund at Thornburg Investment Management. I'm Kathleen Hayes along with pim Fox. This is Bloomberg coming up. Bloomberg Law is brought to by the Town of Hempstead Industrial Development Agency. Find out how to put the Town of Hempstead idea to work

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