4Factor equities

Notes from the road: How Australia’s largest investors are eyeing the EM opportunity

In this Q&A, Varun Laijawalla, co-Portfolio Manager of the Emerging Markets Equity Strategy, shares feedback from his trip to Australia, having met with key institutional clients and consultants.

11 Apr 2024

8 minutes

Varun Laijawalla

Several recurring themes from the meetings, ranging from India’s rapid ascent to South Korea’s ‘Value-up’ programme, and Mexico’s trade relationship with the US, are discussed in full. With so much to consider across emerging markets (EMs) in the coming year - from elections to how to allocate to China – the role of an active, core manager has never been more in focus.

Q How do you plan to navigate India from here?

India has been a bright spot in emerging markets over the past few years. The economy has been growing strongly, and the government has been very clear and transparent in its objectives. This has helped position India as a reliable partner and ultimately an attractive destination for foreign capital. The question from here is, how do you generate positive returns from a country which has seen such a rapid ascent and currently trades at all-time highs?

Q Is there any meat to South Korea’s Value-up programme?

South Korea is currently in the midst of launching its Corporate ‘Value-up’ programme, which aims to prioritise shareholder returns and ultimately increase the value and prominence of South Korea’s equity market. A recent research trip to Seoul made it clear that most companies are in ‘wait-and-see’ mode. The government wants companies to do more to attract foreign capital, but the companies want to be incentivised to do so. The trip comprised of 20 company meetings to better understand the reality on the ground, but what will it take to get this thing moving?

Q Who stands to benefit from the relocation of global supply chains?

Mexico, along with India, has been a huge beneficiary of friend-shoring at the expense of China. Mexico has now overtaken China as the largest trading partner with the US, and current momentum would suggest China will be further marginalised in this ever more polarised world. How could the upcoming US elections impact this fine rebalancing act and where are the likely opportunities?

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Authored by

Varun Laijawalla
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