AAA-rated Asante: inequality a major threat to global growth
AAA-rated Asante is selling down 'expensive' quality companies and is wary of global inequality and environmental concerns which he says threaten global stability and growth.
by Matthew Goodburn on Mar 11, 2013 at 11:26
Euro Stars AAA-rated Jonathan Asante believes that inequality and environmental issues remain the biggest geopolitical risks facing both the emerging and developed world.
First State Global Emerging Markets manager Asante says an inability by governments to deal with their internal problems and poverty in particular, has helped fuel the rise of Al Quaeda's fight with the West, and that China and Japan's islands dispute is a 'symptom of things going wrong in China'.
He told Citywire Global: 'The war going on between Al Queda and the West is spreading globally and it is a function of inequality and a failure of states to deal with their own issues.'
He also warned that resolving growing environmental concerns was becoming paramount if China was to continue its own rapid development.
‘The big issue for China is the environment. The pollution in Beijing and the reduced water table are huge issues and the government will have to try to solve these problems rather than just focus on achieving 10% GDP growth each year.’
Environmental issues will continue to bite and China has to sort it out or it will mean a lot less growth, but China needs steadier, rather than faster growth.'
In terms of his First State GEM Leaders fund, Asante admits that quality global emerging market companies are becoming very expensive as poor quality ones continue to disappoint investors and fall by the wayside.
Asante has been trimming some of his long term favourite quality companies on valuation grounds recently, selling out of Brazilian beverage giant AB InBev which formerly represented almost 4% of the fund, while the quality but more cyclical Taiwan Semiconductor has been reduced from 6% to around 3.5% of the €4.2 billion fund in the past few weeks.
Selling down 'expensive ' quality
Similarly Asante and co-manager Glen Finegan sold out of Unilever Hindustan after a strong run, and reinvested in its UK–listed parent company Unilever to reduce country specific risk in India, while a core stake in South African supermarket brand Shoprite has also been exited.
Overall the fund remains heavily overweight consumer staples, (around 38% of the fund) which tend to provide the strong management, strong cash generation and emerging markets growth potential that Asante seeks.
He told Citywire Global: ‘Consumer staples are great companies because they tend to be more government proof with stable non-cyclical cash flows but many now look very expensive. Across global emerging markets good companies are becoming very expensive. They are highly prized by investors because the more poor quality companies don’t deliver, the more expensive the good ones become as investors flock to them.’
He continues to rate the management team at AB InBev but an expensive current valuation and falling volume growth have led him to sell down the holding.
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