India Is The Most Promising Emerging Market | Angus Shillington
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I'm so pleased to welcome to forward guidance for a fireside chat, Angus Shillington, deputy portfolio manager for the emerging markets equity strategy at VanEck. Angus, welcome to Ford guidance. Thanks,
Jack. It's a real pleasure to be here. Thanks for asking me.
It's my pleasure. Angus, how would you describe emerging markets and how it differs from investing in developed markets or or or DM? What is something that if someone's been a veteran of investing in developed markets for, you know, 1 or even more than one decade, they might not know about emerging markets EM?
It's a fantastic question. I would think about it through the framework of expectations. Right? In the original sort of 1.0 EM, it was a period where EM did well up until the global financial crisis. The expectation was fast development, great demographics, awesome companies emerging, and this crushing inefficiency. Right? So the returns from emerging countries haven't been met. I think the basis is the same. These are deeply inefficient countries with young populations. They have the potential, for company formation and exceptional stock market performance. So
they are higher growth economies than developed markets because their economies are so much smaller in in terms of GDP. How does that track on to the performance of the stock market? One might think, Angus, that the higher growth economy is the better, performing the stock market is, and and sometimes that plays out. However, you look at China, and they they have had an incredible Chinese growth miracle. Their economy has been growing at 8%, 9%, 10%, double digits, yet their stock market, particularly as of late, really has struggled and has not matched anywhere close to how amazing the econom
The expectation is always that a fast growth economy, these sort of eye popping GDP numbers of sort of 6, 7, 8%, will pay off in share prices and stock market returns. Now that's turned out not to be the case in in in many instances. So there is a reevaluation that has gone on. Right? There are fabulous companies like TSMC in Taiwan that have delivered on expectations, but there are a lot of cases. China's a good example where corporate governance hasn't lived up to expectations where demand on capital or where maybe subsidies have taken away from returns to investors.
And, Angus, let's take, China in particular. How is it that government involvement can hinder corporate profit profit growth or allocation of those profits? You mentioned subsidies. And to me, subsidies can be beneficial for a particular company such as if the market rates at 6% and the government allows me to borrow at 0% or 2% or they, you know, give me some sort of credit, that sounds like it would boost profits, not not hinder them. So can you get, you know, specific about what in China is stopping the corporate profit growth from from following the GDP higher?
I mean, to that question specifically, I think you've you've kinda got it separated into sort of domestic market, export market. Domestic market, I think a good analog to follow, which leads you to sort of the key point of risk, which is regulation, right, is what is permitted and what is not permitted. Right? So, you know, the post Deng Xiaoping, you know, to be rich or to get rich is glorious, deregulation kind of process that was triggered, that led to Tencent, Alibaba, all these sort of really fabulous, private businesses were then badly disrupted when the rules changed. Right? So the regu
And the the Chinese stock market has suffered over the past 2 to 3 years. I'm looking at evaluation of one partic
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