James Morton is Cundill's London-based investment manager running a new emerging markets fund for Canadian investors. He's the subject of this article in The Globe and Mail in which he says volatile times are ahead for emerging markets and the euphoria caused by the US Fed rate cut won't last.
The move by the U.S. central bank indicates "quite serious concerns" that the bursting of the American housing bubble is starting to affect growth, and that an economic slowdown is more of a risk than inflation, he suggested in an interview.
Even more significant for him was a move a week ago by U.S. home builder Hovnanian Enterprises Inc. to discount its homes by as much as 30 per cent. "That's a pretty steep markdown," he said. Builders will have to reduce their inventory, and that probably means bad news over the next few months for the job market and U.S. economy, Mr. Morton suggested.
"While interest rate cuts help, they take time to have any kind of impact. So I don't think they can ameliorate the problem in the next six months. "If the United States was to go into a shallow recession next year at some point, that would obviously be damaging for global growth," he said during a visit to Toronto from his base in London.
Over the longer term, he said there is still "a lot of mileage" left in
emerging markets for investors given that developing countries
contribute over 50 per cent of the world's gross domestic product (GDP).
Morton gives some specific stock picks in the linked article. One of them, Lonrho PLC, I looked at a while back but couldn't get enough information to convince me to pull the trigger. Then (of course) it rose in price a good deal. It has since come down a bit, but it is still up significantly.
Lonrho is probably the best pure play in investing in Africa today. Effectively, Lonrho is an investment vehicle snapping up early stage companies at low valuations and giving them that much needed cash to grow. The interesting point is that it is doing it all over Africa and de facto, is a proxy for emerging market investment in Africa.
Posted by: ned1 | September 25, 2007 at 05:44 AM
ned1: Do you know anyone doing research on Lonrho? I've been to their website and done searches, but would like more analyst information.
BTW, I agree with what you say generally. Lonrho offers western style management with a continent wide focus (no single country risk). Africa's grown at 4%-5% which isn't as sexy as China or India, but pretty good nonetheless.
Posted by: John | September 25, 2007 at 10:31 PM