• Share
  • Email
  • Embed
  • Like
  • Save
  • Private Content
Emerging and Frontier Markets Overview - May 2013 - Singularis, Barcelona
 

Emerging and Frontier Markets Overview - May 2013 - Singularis, Barcelona

on

  • 471 views

LMG Emerge's CEO/CIO Erik L van Dijk delivered this keynote presentation at the Singularis Emerging and Frontier Markets Summit in Barcelona, Spain on Monday, May 27. ...

LMG Emerge's CEO/CIO Erik L van Dijk delivered this keynote presentation at the Singularis Emerging and Frontier Markets Summit in Barcelona, Spain on Monday, May 27.

It was well received by the audience of family offices, colleagues and institutional investors.

Essential aspects of the presentation: investors need to do more in Emerging and Frontier Markets, but valuation levels are not such that they should rush and follow benchmarks. The main benchmarks do have some flaws.

One should also pay above-averfage attention to small and micro caps, probably only via LOCAL managers or those with local presence.

And LMG believes that it will be different for Frontier Markets stocks this time round, finally!

Statistics

Views

Total Views
471
Views on SlideShare
470
Embed Views
1

Actions

Likes
0
Downloads
1
Comments
0

1 Embed 1

https://twitter.com 1

Accessibility

Upload Details

Uploaded via as Adobe PDF

Usage Rights

© All Rights Reserved

Report content

Flagged as inappropriate Flag as inappropriate
Flag as inappropriate

Select your reason for flagging this presentation as inappropriate.

Cancel
  • Full Name Full Name Comment goes here.
    Are you sure you want to
    Your message goes here
    Processing…
Post Comment
Edit your comment

    Emerging and Frontier Markets Overview - May 2013 - Singularis, Barcelona Emerging and Frontier Markets Overview - May 2013 - Singularis, Barcelona Presentation Transcript

    • Accessing Opportunities inEmerging and Frontier Markets(Smart) Money Flows in a Changing WorldPresentation for the ‘Emerging and Frontier Markets’ Roundtable,organized by Singularis, Barcelona (SPA, May 2013)May 28, 2013Erik L. van DijkPrincipal
    • 1. LMG EmergeWho we areLMG EmergeSolutions-driven implemented consultant active in the Benelux, MENA-Africa, and Australasia; currentlystaff of 8; additional ‘human resources’ via backbone partnershipsAreas of expertise:1. Asset Allocation / Portfolio Optimization2. Emerging and Frontier Markets3. Asset Manager Selection‘Backbone partners’: Emirates NBD (GLOCAL EM & Islamic Finance); Invest AD (GLOCAL FM); EdRothschild AM (Dev Markets), Evestment Alliance and Camradata (Man Selection)Asset Allocation approach incorporates approximately 100 countries• Innovative joint work with Nobel Prize Laureate dr Markowitz (FAJ Mar-Apr 2003), chosen bydr Markowitz and a group of fellow Nobel Laureates as one of his best articles• Monte Carlo simulations by Prof M Kritzman (MIT) confirm added-value of the underlyingheuristic (MIT Working Paper 2007)Advisory Assets under Management have amounted to more than Euro 40 billion over the period 2005-currentSince April 2013 advisor to a SIF Sicav in Luxemburg, based on our GLOCAL approach
    • We believe that:• Real diversification is the most effective method to control portfolio volatility• Asset allocation is responsible for the majority of investment portfolio returns and risk• Real asset classes provide investors a risk premium vs. inflation and cash over time• Markets are not efficient, and Emerging Markets are often very inefficient• Emerging markets will be the growth engine of the global economy for next 50 years• Local players will play a growing role in Emerging Markets asset management (GLOCAL)1. LMG EmergeWhat we believe in
    • 2. Asset Allocation andDiversificationGary Brinson et al.:"The bulk of investment success or failure can be explainedby asset allocation decisions"
    • 2. Asset Allocation (2)? ? ?ALM/SAAEquitiesBonds OtherCurrent PracticeAlpha At Risk Risk Control GapBetter structure for increasedrisk-adjusted returns:ALM/SAAEquitiesBonds OtherStructuredGTAA
    • 2. Diversification –The Free LunchUS Example. Interesting now that internationalcorrelations are creeping up to levelspreviously only seen nationally.
    • 2. Diversification –Are Correlation Trends eating away our Free Lunch?But what is going on? Even within countriesthere is a tendency for correlations to go up!
    • 3. Emerging and FrontierMarketsEmerging and Frontier Markets will add more and more valueto Asset Allocation / Portfolio Optimization:• We believe that Emerging and Frontier Markets can add anincreasing amount of value because of:– Performance– Diversification opportunities– Growing universe both within asset classes and outside the‘prime asset class of the past’ (EM and FM equities): EM Debt(hard and soft currency), Private Equity, Hedge Funds, RealEstate, Infrastructure et cetera.– New products (e.g. Islamic Finance)– Man-Machine: they are getting more important and skilled,both at the financial professional and investor level (e.g.wealth funds)
    • 3. Emerging and FrontierMarkets (2)The Increased Opportunity Set in Emerging and FrontierMarkets will translate into a spectacular increase in theallocation of funds to these markets, not just in Asia or theBRIC countries but also in Africa:– Excess growth vis-à-vis more mature economies will continue (seealso next slide from our MENA-Africa partner Invest AD)– Changes in the ‘balance-of-power’ between internationally-operatinginstitutional and family office investors, will lead to changes in theexisting ‘foreign bias’– Relative improvements in legal and governance structures in EM andFM nations, in combination with a larger investment opportunity setand market liquidity will translate into a reduction in the risk gap vis-à-vis more developed markets
    • But rapid growth expected in coming yearsGDP growth 2011-2015 (CAGR)Iraq 10.8%China 9.5%India 8.2%Ethiopia 8.1%Mozambique 7.7%Tanzania 7.3%Vietnam 7.2%D.R. Congo 7.0%Ghana 7.0%Zambia 6.9%Afghanistan 6.9%Nigeria 6.8%Excluding countries with less than 10 millionpopulation. Eg. Qatar forecast GDP growth of8.4% 2011-2015 CAGRSource: IMF January 201110
    • 4. But What About ValuationLevels?Equity Market Analysis based on MSCI Global Monitor (End-of-April2013)“How to incorporate the EM and FM theme when marketsare not really cheap anymore and the world suffers from aset of major risks and uncertainties’’
    • 4.1.1 Market ReturnsDEV MarketsMSCI Index Market Type Region #Sec Month 1Yr 3 Yr 5 Yr 10 YrAUSTRALIA DM DEV Asia/Oceania 69 4.67% 25.68% 11.32% 5.64% 16.32%HONG KONG DM DEV Asia/Oceania 41 2.59% 19.11% 12.14% 4.66% 14.96%ISRAEL DM DEV Asia/Oceania 10 -1.56% -8.05% -8.98% -4.02% 8.27%JAPAN DM DEV Asia/Oceania 316 8.77% 22.15% 6.51% -0.09% 8.08%NEW ZEALAND DM DEV Asia/Oceania 5 6.40% 30.89% 21.38% 7.58% 12.58%SINGAPORE DM DEV Asia/Oceania 30 3.43% 15.96% 10.25% 5.41% 17.32%AUSTRIA DM DEV Europe 9 6.41% 15.34% -2.65% -16.01% 5.93%BELGIUM DM DEV Europe 11 1.78% 33.05% 13.76% -5.85% 8.60%DENMARK DM DEV Europe 11 4.08% 17.39% 10.81% 2.75% 16.02%FINLAND DM DEV Europe 14 6.35% 17.67% -1.39% -10.78% 3.41%FRANCE DM DEV Europe 72 6.06% 24.03% 5.29% -3.23% 8.59%GERMANY DM DEV Europe 51 4.25% 17.36% 9.18% -1.44% 12.12%GREECE DM DEV Europe 2 0.09% 13.60% -31.33% -34.50% -6.12%IRELAND DM DEV Europe 4 -1.23% 10.03% 1.10% -18.74% -3.13%ITALY DM DEV Europe 25 11.96% 14.94% -3.93% -11.90% 2.60%NETHERLANDS DM DEV Europe 22 3.72% 23.33% 5.60% -2.37% 9.38%NORWAY DM DEV Europe 10 3.76% 10.85% 10.00% -3.14% 17.20%PORTUGAL DM DEV Europe 5 10.89% 19.18% -0.35% -9.39% 6.18%SPAIN DM DEV Europe 23 10.54% 28.79% -1.66% -7.29% 8.81%SWEDEN DM DEV Europe 32 2.46% 22.75% 11.87% 5.72% 15.68%SWITZERLAND DM DEV Europe 39 4.62% 29.50% 14.79% 6.25% 12.54%UNITED KINGDOM DM DEV Europe 106 3.08% 11.74% 9.54% 0.09% 8.59%CANADA DM North America 95 -1.40% 2.20% 2.68% -0.01% 13.05%USA DM North America 604 1.98% 16.86% 12.94% 5.32% 8.05%Global 1606 3.22% 17.40% 10.21% 2.41% 8.87%AVERAGE 1606 4.32% 18.10% 4.95% -3.56% 9.38%Gross Total Performance; MSCI Indices April 2013 (incl last 10 years)MSCI World Index
    • 4.1.2 Market ReturnsEM MarketsMSCI Index Market Type Region #Sec Month 1Yr 3 Yr 5 Yr 10 YrINDIA EM Asia ex China 72 4.18% 11.82% -3.10% -2.98% 19.99%INDONESIA EM Asia ex China 26 2.04% 17.69% 14.37% 14.60% 29.66%KOREA EM Asia ex China 103 -2.40% -0.75% 5.42% 1.25% 15.34%MALAYSIA EM Asia ex China 42 4.70% 10.09% 12.65% 9.33% 15.99%PHILIPPINES EM Asia ex China 18 2.57% 44.05% 30.22% 21.35% 25.03%TAIWAN EM Asia ex China 114 4.04% 11.35% 6.67% 1.26% 10.60%THAILAND EM Asia ex China 25 3.27% 22.26% 28.46% 15.30% 23.63%CHINA EM China 138 1.14% 4.42% 1.26% -1.58% 19.14%CZECH REPUBLIC EM EM Europe/Central Asia 3 0.53% -14.29% -6.20% -9.15% 17.32%HUNGARY EM EM Europe/Central Asia 3 8.73% 0.99% -12.86% -10.94% 8.16%POLAND EM EM Europe/Central Asia 22 0.98% 10.43% -0.24% -6.75% 12.86%RUSSIA EM EM Europe/Central Asia 27 -2.10% -5.99% -0.49% -9.22% 11.47%TURKEY EM EM Europe/Central Asia 25 2.14% 47.14% 8.60% 8.42% 22.32%BRAZIL EM Latin America 80 1.88% -5.03% -4.98% -4.88% 23.20%CHILE EM Latin America 21 -3.14% -5.64% 6.92% 7.14% 19.37%COLOMBIA EM Latin America 14 -3.74% -4.39% 14.46% 15.19% 36.78%MEXICO EM Latin America 26 -2.03% 16.65% 11.68% 5.43% 19.22%PERU EM Latin America 3 -11.87% -9.92% 6.97% 2.99% 26.00%EGYPT EM MENA 7 -0.30% -7.34% -13.79% -14.50% 25.66%MOROCCO EM MENA 3 3.85% -6.56% -7.76% -10.57% 12.92%SOUTH AFRICA EM MENA 50 -0.22% -3.42% 5.54% 4.94% 16.99%Global 822 0.79% 4.34% 3.44% -0.02% 16.50%AVERAGE 822 0.68% 6.36% 4.94% 1.74% 19.60%Gross Total Performance; MSCI Indices April 2013 (incl last 10 years)MSCI EM Index
    • 4.1.3 Market ReturnsFM MarketsMSCI Index Market Type Region #Sec Month 1Yr 3 Yr 5 Yr 10 YrBOTSWANA FM Africa 2 5.64% 43.65% 2.70%GHANA FM Africa 2 3.55% 103.02% 24.99%KENYA FM Africa 6 3.03% 70.79% 19.57% 4.95% 20.49%MAURITIUS FM Africa 2 -0.25% 13.96% 8.07% -1.95% 20.90%NIGERIA FM Africa 12 0.39% 63.65% 16.42% -7.62% 15.63%TUNISIA FM Africa 3 -0.34% -7.15% -2.10% 0.22%ZIMBABWE FM Africa 2 2.69% 79.10%BANGLADESH FM Asia ex China 9 -5.26% -18.68% -17.66%PAKISTAN FM Asia ex China 12 4.63% 18.70% 14.04% -5.21% 12.28%SRI LANKA FM Asia ex China 5 2.21% 24.05% 12.72% 12.95% 16.96%VIETNAM FM Asia ex China 9 -6.23% -2.64% -6.05% -3.00%BOSNIA AND HERZEGOVINA FM EM Europe/Central Asia 2 1.54% 11.50%BULGARIA FM EM Europe/Central Asia 2 12.32% 6.20% -14.92% -29.36%CROATIA FM EM Europe/Central Asia 4 2.52% 9.09% 1.40% -3.18% 8.49%ESTONIA FM EM Europe/Central Asia 2 2.06% 44.70% 10.58% 3.93% 13.22%KAZAKHSTAN FM EM Europe/Central Asia 4 -3.17% 2.79% -5.28% -8.51%LITHUANIA FM EM Europe/Central Asia 2 3.28% 22.20% 12.05%ROMANIA FM EM Europe/Central Asia 3 -3.43% 4.29% -0.61% -13.09%SERBIA FM EM Europe/Central Asia 2 4.52% 30.06% -3.82%SLOVENIA FM EM Europe/Central Asia 3 9.76% 7.42% -9.44% -17.17% 5.08%UKRAINE FM EM Europe/Central Asia 2 -9.27% -48.32% -38.12% -36.57%ARGENTINA FM Latin America 5 4.91% 3.01% -11.47% -12.88% 10.59%JAMAICA FM Latin America 2 5.97% -25.65% -0.51%TRINIDAD AND TOBAGO FM Latin America 2 -0.09% 26.13% 15.05%BAHRAIN FM MENA 2 -1.87% -8.48% -11.28% -28.28%JORDAN FM MENA 4 -1.58% -6.19% -7.58% -13.76% 5.06%KUWAIT FM MENA 12 6.59% 7.62% 3.44% -9.80%LEBANON FM MENA 5 6.69% 5.35% -8.20% -4.16% 13.74%OMAN FM MENA 8 2.71% 1.46% -2.68% -9.97%QATAR FM MENA 13 2.39% 4.18% 10.20% -0.04%UNITED ARAB EMIRATES FM MENA 9 11.29% 49.04% 11.43% -10.83%Global 140 3.73% 17.11% 3.71% -8.89% 8.31%AVERAGE 152 2.17% 17.25% 0.79% -8.79% 12.95%Gross Total Performance; MSCI Indices April 2013 (incl last 10 years)MSCI FM Index
    • 4.2.1 Valuation LevelsDEV MarketsRET VAL LMGMSCI Index Market Type Region SCORE P/B P/E P/C YIELD ROE SCORE SCOREAUSTRALIA DM DEV Asia/Oceania 0.1 2.10 18.39 11.93 4.12 11.42 0.0 0.1HONG KONG DM DEV Asia/Oceania 0.1 1.36 15.65 12.60 2.51 8.71 -0.5 -0.4ISRAEL DM DEV Asia/Oceania 0.3 1.45 12.08 7.50 3.37 11.99 0.0 0.3JAPAN DM DEV Asia/Oceania 0.6 1.42 23.61 9.01 1.67 6.01 -0.6 -0.1NEW ZEALAND DM DEV Asia/Oceania 0.1 1.95 20.92 9.68 4.59 9.30 -0.1 0.0SINGAPORE DM DEV Asia/Oceania 0.1 1.57 13.34 11.16 3.06 11.74 -0.1 0.0AUSTRIA DM DEV Europe 0.7 0.93 11.84 4.60 2.92 7.89 0.1 0.8BELGIUM DM DEV Europe 0.4 1.86 20.30 11.70 3.10 9.18 -0.5 -0.1DENMARK DM DEV Europe 0.1 2.56 18.57 11.22 1.97 13.79 -0.8 -0.6FINLAND DM DEV Europe 0.7 1.66 26.37 10.53 5.20 6.28 -0.3 0.4FRANCE DM DEV Europe 0.6 1.28 15.70 7.82 3.67 8.15 -0.1 0.4GERMANY DM DEV Europe 0.3 1.50 11.43 6.21 3.27 13.15 0.0 0.3GREECE DM DEV Europe 0.7 2.20 11.86 7.78 4.21 18.57 0.0 0.7IRELAND DM DEV Europe 0.6 1.83 31.53 13.95 2.12 5.79 -0.8 -0.2ITALY DM DEV Europe 0.7 0.80 16.66 3.79 3.47 4.79 0.0 0.7NETHERLANDS DM DEV Europe 0.6 1.44 15.99 8.76 2.72 9.02 -0.4 0.2NORWAY DM DEV Europe 0.3 1.58 10.38 5.70 4.43 15.19 0.4 0.7PORTUGAL DM DEV Europe 0.7 1.43 16.81 5.09 5.54 8.49 0.0 0.7SPAIN DM DEV Europe 0.8 1.17 34.87 5.26 6.06 3.36 0.3 1.0SWEDEN DM DEV Europe 0.1 2.13 15.71 11.20 3.75 13.56 0.0 0.1SWITZERLAND DM DEV Europe 0.1 2.56 19.78 14.61 2.82 12.94 -0.5 -0.4UNITED KINGDOM DM DEV Europe 0.1 1.82 13.21 8.09 3.62 13.81 0.0 0.1CANADA DM North America 0.4 1.79 15.29 8.77 3.13 11.69 -0.1 0.3USA DM North America 0.2 2.44 16.49 10.47 2.10 14.77 -0.8 -0.5Global 0.1 1.97 16.46 9.56 2.59 11.95 -0.1 0.0AVERAGE 0.4 1.70 17.78 9.06 3.48 10.40 -0.2 0.2Normalized 0.0 1.75 12.00 8.00 3.00 15.00 0.00 0.0Valuation IndicatorsGross Total Performance; MSCI World Countries - Apr 2013MSCI World Index
    • 4.2.2 Valuation LevelsEM MarketsRET VAL LMGMSCI Index Market Type Region SCORE P/B P/E P/C YIELD ROE SCORE SCOREINDIA EM Asia ex China 0.8 2.67 15.70 11.36 1.35 17.02 -0.5 0.3INDONESIA EM Asia ex China -0.1 4.09 18.94 12.91 2.25 21.57 -0.5 -0.6KOREA EM Asia ex China -0.1 1.13 10.08 5.62 1.08 11.22 -0.1 -0.2MALAYSIA EM Asia ex China -0.1 2.16 15.45 10.30 2.99 13.98 -0.3 -0.4PHILIPPINES EM Asia ex China -0.1 3.53 22.88 15.72 1.55 15.44 -0.8 -0.9TAIWAN EM Asia ex China 0.3 1.86 20.27 9.34 3.27 9.20 -0.4 0.0THAILAND EM Asia ex China -0.1 2.58 15.43 10.45 2.81 16.71 -0.5 -0.6CHINA EM China 0.3 1.55 10.50 7.54 3.11 14.78 0.0 0.3CZECH REPUBLIC EM EM Europe/Central Asia 0.2 1.32 8.79 4.53 8.47 15.06 0.5 0.7HUNGARY EM EM Europe/Central Asia 0.4 0.91 10.90 3.44 3.38 8.37 0.1 0.6POLAND EM EM Europe/Central Asia 0.9 1.25 9.60 4.46 6.00 13.05 0.6 1.5RUSSIA EM EM Europe/Central Asia 0.3 0.76 5.02 3.33 3.66 15.13 0.5 0.8TURKEY EM EM Europe/Central Asia -0.1 1.95 12.49 9.77 2.06 15.62 -0.3 -0.4BRAZIL EM Latin America 0.2 1.46 14.85 9.12 4.18 9.80 0.0 0.2CHILE EM Latin America -0.1 2.08 24.19 14.57 2.12 8.58 -0.8 -0.9COLOMBIA EM Latin America -0.6 1.76 18.07 12.26 3.00 9.76 -0.5 -1.1MEXICO EM Latin America 0.3 3.01 20.15 10.31 1.52 14.92 -0.8 -0.4PERU EM Latin America -0.1 2.74 12.82 10.40 4.33 21.40 0.1 0.0EGYPT EM MENA 0.3 1.31 14.15 8.33 2.90 9.24 0.0 0.3MOROCCO EM MENA 0.1 2.49 12.81 8.37 4.69 19.40 0.3 0.4SOUTH AFRICA EM MENA -0.1 2.36 15.91 10.44 3.28 14.81 -0.5 -0.6Global 0.3 1.60 12.41 7.66 2.77 12.88 0.0 0.3AVERAGE 0.1 2.05 14.71 9.17 3.24 14.05 -0.2 0.0Normalized 0.0 1.75 12.00 8.00 3.00 15.00 0.00 0.0Gross Total Performance; MSCI World Countries - Apr 2013 Valuation IndicatorsMSCI EM Index
    • 4.2.3 Valuation LevelsFM MarketsRET VAL LMGMSCI Index Market Type Region SCORE P/B P/E P/C YIELD ROE SCORE SCOREBOTSWANA FM Africa 0.2 2.62 10.25 8.11 3.35 25.56 0.0 0.2GHANA FM Africa 0.0 5.22 15.69 19.03 5.22 33.28 0.0 0.0KENYA FM Africa 0.1 3.94 13.42 13.62 3.49 29.33 -0.1 0.0MAURITIUS FM Africa 0.6 1.65 10.42 9.89 3.22 15.85 0.0 0.6NIGERIA FM Africa 0.4 2.83 12.91 22.76 3.71 21.91 -0.1 0.3TUNISIA FM Africa 0.0 2.48 20.58 8.26 2.36 12.03 -0.4 -0.4ZIMBABWE FM Africa 0.2 3.85 11.57 9.27 1.91 33.28 -0.3 0.0BANGLADESH FM Asia ex China 0.0 1.36 10.22 8.41 3.09 13.30 0.0 0.0PAKISTAN FM Asia ex China 0.3 1.96 8.21 6.53 7.16 23.88 0.6 1.0SRI LANKA FM Asia ex China -0.1 2.52 15.44 13.64 2.12 16.30 -0.8 -0.9VIETNAM FM Asia ex China 0.2 2.50 17.87 15.32 3.98 14.01 -0.3 0.0BOSNIA AND HERZEGOVINA FM EM Europe/Central Asia 0.3 0.51 13.38 4.88 5.51 3.79 0.4 0.7BULGARIA FM EM Europe/Central Asia 0.3 0.40 4.48 3.36 1.86 8.85 0.0 0.3CROATIA FM EM Europe/Central Asia 0.6 1.41 12.54 7.03 6.49 11.24 0.0 0.6ESTONIA FM EM Europe/Central Asia 0.1 0.99 12.14 5.71 1.07 8.15 -0.1 0.0KAZAKHSTAN FM EM Europe/Central Asia 0.6 0.98 6.55 5.34 6.78 14.94 0.8 1.3LITHUANIA FM EM Europe/Central Asia 0.0 2.55 13.70 8.21 5.80 18.65 0.0 0.0ROMANIA FM EM Europe/Central Asia 0.6 0.97 10.79 3.85 2.67 9.02 0.1 0.7SERBIA FM EM Europe/Central Asia 0.4 0.68 3.58 2.80 0.00 19.03 0.5 0.9SLOVENIA FM EM Europe/Central Asia 0.3 1.16 14.37 6.35 3.65 8.10 0.0 0.3UKRAINE FM EM Europe/Central Asia 0.2 0.58 2.26 1.89 0.50 25.76 0.5 0.7ARGENTINA FM Latin America 0.4 0.78 3.99 2.00 5.17 19.65 1.0 1.4JAMAICA FM Latin America -0.4 0.82 5.34 6.05 7.04 15.29 0.6 0.2TRINIDAD AND TOBAGO FM Latin America 0.2 1.85 13.14 8.19 3.12 14.11 0.0 0.2BAHRAIN FM MENA 0.2 1.00 8.58 5.10 6.54 11.69 0.8 1.0JORDAN FM MENA 0.2 1.23 12.82 8.39 4.42 9.61 0.3 0.5KUWAIT FM MENA 0.1 1.72 17.64 9.17 3.37 9.78 -0.4 -0.3LEBANON FM MENA 0.4 1.03 9.73 12.77 3.14 10.63 -0.1 0.3OMAN FM MENA 0.3 1.46 10.31 6.29 4.81 14.12 0.3 0.6QATAR FM MENA -0.1 1.69 12.46 6.65 4.86 13.57 0.3 0.1UNITED ARAB EMIRATES FM MENA 0.2 1.17 14.10 11.15 2.61 8.26 -0.1 0.1Global 0.6 1.57 11.82 7.27 3.98 13.28 0.3 0.8AVERAGE 0.2 1.74 11.24 8.39 3.84 15.90 0.1 0.3Normalized 0.0 1.75 12.00 8.00 3.00 15.00 0.00 0.0Gross Total Performance; MSCI World Countries - Apr 2013 Valuation IndicatorsMSCI FM Index
    • 4.3 ConclusionsWhat can we say of Valuation Levels today?DEV Markets had a great year in terms of returns, but skepticismconcerning their valuation levels remainsEM Markets did well over the last 10 years, but the main MSCIindices did poorly during the last 5 yearsReal momentum to be found in FM Markets, but they are ofcourse also the most risky onesLMG themes today:- Russia/Central Asia/Eastern Europe- DEV Europe Periphery- Small & Mid-Cap Stocks in EM- Frontier Markets (finally!)Also: Do not expect miracles. It will be more a period of ‘Risk’-than ‘Return-dominance’AND BE VERY CAREFULL OF STANDARD MV-BASEDBENCHMARKS
    • 5. What About Benchmarks?Main indices are still based on Market Values…..“But dozens of studies did already indicate that some kindof ‘fundamental’ indexing or even a (more) equalweighting could already add value!’’
    • 5.1.1 Benchmark LevelsDEV MarketsMSCI Index Market Type Region #Sec %Sec MV$ %MV GDP-PPP %GDP Debt to GDP Category %DebtAUSTRALIA DM DEV Asia/Oceania 69 4.30% 1,101.81$ 3.90% 960.70$ 2.51% 26.9% 5 6.30%HONG KONG DM DEV Asia/Oceania 41 2.55% 367.84$ 1.30% 363.70$ 0.95% 30.0% 5 6.30%ISRAEL DM DEV Asia/Oceania 10 0.62% 60.38$ 0.21% 247.90$ 0.65% 74.4% 4 5.04%JAPAN DM DEV Asia/Oceania 316 19.68% 2,642.82$ 9.36% 4,525.00$ 11.83% 214.3% 0 0.45%NEW ZEALAND DM DEV Asia/Oceania 5 0.31% 15.65$ 0.06% 128.50$ 0.34% 41.8% 5 6.30%SINGAPORE DM DEV Asia/Oceania 30 1.87% 209.44$ 0.74% 325.10$ 0.85% 111.4% 2 2.52%AUSTRIA DM DEV Europe 9 0.56% 32.57$ 0.12% 357.80$ 0.94% 74.6% 4 5.04%BELGIUM DM DEV Europe 11 0.68% 137.25$ 0.49% 419.60$ 1.10% 99.6% 3 3.78%DENMARK DM DEV Europe 11 0.68% 135.98$ 0.48% 208.50$ 0.55% 45.3% 5 6.30%FINLAND DM DEV Europe 14 0.87% 90.78$ 0.32% 198.10$ 0.52% 53.5% 4 5.04%FRANCE DM DEV Europe 72 4.48% 1,116.25$ 3.95% 2,253.00$ 5.89% 89.9% 3 3.78%GERMANY DM DEV Europe 51 3.18% 988.36$ 3.50% 3,123.00$ 8.17% 81.7% 3 3.78%GREECE DM DEV Europe 2 0.12% 7.18$ 0.03% 280.80$ 0.73% 161.3% 0 0.00%IRELAND DM DEV Europe 4 0.25% 31.51$ 0.11% 191.50$ 0.50% 118.0% 2 2.52%ITALY DM DEV Europe 25 1.56% 248.34$ 0.88% 1,834.00$ 4.80% 126.1% 1 1.26%NETHERLANDS DM DEV Europe 22 1.37% 286.72$ 1.02% 709.50$ 1.86% 68.7% 4 5.04%NORWAY DM DEV Europe 10 0.62% 104.09$ 0.37% 278.10$ 0.73% 30.3% 5 6.30%PORTUGAL DM DEV Europe 5 0.31% 21.73$ 0.08% 245.00$ 0.64% 119.7% 2 2.52%SPAIN DM DEV Europe 23 1.43% 344.00$ 1.22% 1,409.00$ 3.68% 85.3% 3 3.78%SWEDEN DM DEV Europe 32 1.99% 376.40$ 1.33% 395.80$ 1.03% 38.6% 5 6.30%SWITZERLAND DM DEV Europe 39 2.43% 1,078.34$ 3.82% 362.40$ 0.95% 52.4% 4 5.04%UNITED KINGDOM DM DEV Europe 106 6.60% 2,571.13$ 9.11% 2,323.00$ 6.07% 88.7% 3 3.78%CANADA DM North America 95 5.92% 1,220.70$ 4.32% 1,446.00$ 3.78% 84.1% 3 3.78%USA DM North America 604 37.61% 15,041.70$ 53.28% 15,660.00$ 40.95% 73.6% 4 5.04%Global 1606 100.00% 28,230.97$ 100.00% 38,246.00$ 100.00% 1990.2% 79 100.00%Calculation LMG Weights; MSCI Indices Developed Markets April 2013MSCI World Index
    • 5.1.2 Benchmark LevelsEM MarketsMSCI Index Market Type Region #Sec %Sec MV$ %MV GDP-PPP %GDP Debt to GDP Category %DebtINDIA EM Asia ex China 72 8.76% 260.87$ 6.81% 4,784.00$ 14.11% 51.9% 4 4.04%INDONESIA EM Asia ex China 26 3.16% 117.55$ 3.07% 1,212.00$ 3.57% 24.8% 6 6.06%KOREA EM Asia ex China 103 12.53% 553.30$ 14.44% 1,611.00$ 4.75% 33.7% 5 5.05%MALAYSIA EM Asia ex China 42 5.11% 139.01$ 3.63% 492.40$ 1.45% 53.5% 4 4.04%PHILIPPINES EM Asia ex China 18 2.19% 41.28$ 1.08% 423.70$ 1.25% 51.0% 4 4.04%TAIWAN EM Asia ex China 114 13.87% 428.54$ 11.18% 901.90$ 2.66% 36.0% 5 5.05%THAILAND EM Asia ex China 25 3.04% 108.11$ 2.82% 645.70$ 1.90% 43.3% 5 5.05%CHINA EM China 138 16.79% 698.01$ 18.21% 12,380.00$ 36.50% 31.7% 5 5.05%CZECH REPUBLIC EM EM Europe/Central Asia 3 0.36% 9.22$ 0.24% 286.70$ 0.85% 43.9% 5 5.05%HUNGARY EM EM Europe/Central Asia 3 0.36% 8.49$ 0.22% 195.40$ 0.58% 78.6% 3 3.03%POLAND EM EM Europe/Central Asia 22 2.68% 58.21$ 1.52% 799.20$ 2.36% 53.8% 4 4.04%RUSSIA EM EM Europe/Central Asia 27 3.28% 218.57$ 5.70% 2,504.00$ 7.38% 12.2% 6 6.06%TURKEY EM EM Europe/Central Asia 25 3.04% 83.14$ 2.17% 1,125.00$ 3.32% 40.4% 5 5.05%BRAZIL EM Latin America 80 9.73% 485.00$ 12.65% 2,362.00$ 6.96% 54.9% 4 4.04%CHILE EM Latin America 21 2.55% 72.81$ 1.90% 319.40$ 0.94% 10.1% 6 6.06%COLOMBIA EM Latin America 14 1.70% 43.40$ 1.13% 500.00$ 1.47% 40.2% 5 5.05%MEXICO EM Latin America 26 3.16% 206.80$ 5.40% 1,761.00$ 5.19% 35.4% 5 5.05%PERU EM Latin America 3 0.36% 19.67$ 0.51% 325.40$ 0.96% 18.3% 6 6.06%EGYPT EM MENA 7 0.85% 9.89$ 0.26% 537.80$ 1.59% 85.0% 3 3.03%MOROCCO EM MENA 3 0.36% 3.18$ 0.08% 171.00$ 0.50% 71.7% 4 4.04%SOUTH AFRICA EM MENA 50 6.08% 267.81$ 6.99% 578.60$ 1.71% 43.3% 5 5.05%Global 822 100.00% 3,832.86$ 100.00% 33,916.20$ 16.50% 913.7% 99 100.00%Calculation LMG Weights; MSCI Indices Emerging Markets April 2013MSCI EM Index
    • 5.1.3 Benchmark LevelsFM MarketsMSCI Index Market Type Region #Sec %Sec MV$ %MV GDP-PPP %GDP Debt to GDP Category %DebtBOTSWANA FM Africa 2 1.32% -$ 0.00% 32.67$ 0.66% 23.0% 6 4.32%GHANA FM Africa 2 1.32% -$ 0.00% 83.18$ 1.67% 47.4% 5 3.60%KENYA FM Africa 6 3.95% 4.44$ 3.79% 76.07$ 1.53% 50.0% 5 3.60%MAURITIUS FM Africa 2 1.32% 1.03$ 0.88% 20.26$ 0.41% 61.8% 4 2.88%NIGERIA FM Africa 12 7.89% 16.88$ 14.40% 450.50$ 9.05% 18.8% 6 4.32%TUNISIA FM Africa 3 1.97% 0.74$ 0.63% 104.40$ 2.10% 52.3% 4 2.88%ZIMBABWE FM Africa 2 1.32% -$ 0.00% 6.91$ 0.14% 202.7% 0 0.00%BANGLADESH FM Asia ex China 9 5.92% 2.10$ 1.79% 305.50$ 6.14% 32.0% 5 3.60%PAKISTAN FM Asia ex China 12 7.89% 4.83$ 4.12% 514.60$ 10.34% 50.4% 4 2.88%SRI LANKA FM Asia ex China 5 3.29% 1.97$ 1.68% 125.30$ 2.52% 81.0% 3 2.16%VIETNAM FM Asia ex China 9 5.92% 2.36$ 2.01% 320.10$ 6.43% 48.2% 5 3.60%BOSNIA AND HERZEGOVINA FM EM Europe/Central Asia 2 1.32% -$ 0.00% 32.08$ 0.64% 43.8% 5 3.60%BULGARIA FM EM Europe/Central Asia 2 1.32% 0.12$ 0.10% 103.70$ 2.08% 17.9% 6 4.32%CROATIA FM EM Europe/Central Asia 4 2.63% 2.37$ 2.02% 79.14$ 1.59% 52.1% 4 2.88%ESTONIA FM EM Europe/Central Asia 2 1.32% 0.62$ 0.53% 28.44$ 0.57% 8.0% 6 4.32%KAZAKHSTAN FM EM Europe/Central Asia 4 2.63% 4.43$ 3.78% 231.30$ 4.65% 12.0% 6 4.32%LITHUANIA FM EM Europe/Central Asia 2 1.32% 0.18$ 0.15% 64.80$ 1.30% 38.5% 5 3.60%ROMANIA FM EM Europe/Central Asia 3 1.97% 1.35$ 1.15% 274.10$ 5.51% 37.2% 5 3.60%SERBIA FM EM Europe/Central Asia 2 1.32% 0.35$ 0.30% 78.43$ 1.58% 61.5% 4 2.88%SLOVENIA FM EM Europe/Central Asia 3 1.97% 2.04$ 1.74% 58.06$ 1.17% 53.2% 4 2.88%UKRAINE FM EM Europe/Central Asia 2 1.32% 0.19$ 0.16% 335.40$ 6.74% 38.8% 5 3.60%ARGENTINA FM Latin America 5 3.29% 3.69$ 3.15% 746.90$ 15.01% 41.6% 5 3.60%JAMAICA FM Latin America 2 1.32% -$ 0.00% 25.18$ 0.51% 127.3% 1 0.72%TRINIDAD AND TOBAGO FM Latin America 2 1.32% -$ 0.00% 27.12$ 0.55% 46.6% 5 3.60%BAHRAIN FM MENA 2 1.32% 0.56$ 0.48% 32.44$ 0.65% 56.2% 4 2.88%JORDAN FM MENA 4 2.63% 0.89$ 0.76% 38.67$ 0.78% 75.0% 4 2.88%KUWAIT FM MENA 12 7.89% 28.54$ 24.35% 165.90$ 3.33% 7.1% 6 4.32%LEBANON FM MENA 5 3.29% 2.68$ 2.29% 63.69$ 1.28% 127.9% 1 0.72%OMAN FM MENA 8 5.26% 3.75$ 3.20% 90.66$ 1.82% 3.6% 6 4.32%QATAR FM MENA 13 8.55% 17.53$ 14.96% 189.00$ 3.80% 32.5% 5 3.60%UNITED ARAB EMIRATES FM MENA 9 5.92% 13.57$ 11.58% 271.20$ 5.45% 40.4% 5 3.60%Global 152 100.00% 117.21$ 100.00% 4,975.70$ 100.00% 1588.8% 139 100.00%Calculation LMG Weights; MSCI Indices Frontier Markets April 2013MSCI FM Index
    • 5.2 Benchmark ComparisonTop 25 %MV Top 25 LMGUSA DM 46.74% USA DM 22.65%JAPAN DM 8.21% JAPAN DM 6.54%UNITED KINGDOM DM 7.99% CHINA EM 6.04%CANADA DM 3.79% UNITED KINGDOM DM 3.94%FRANCE DM 3.47% INDIA EM 2.64%AUSTRALIA DM 3.42% CANADA DM 2.51%SWITZERLAND DM 3.35% FRANCE DM 2.46%GERMANY DM 3.07% GERMANY DM 2.42%CHINA EM 2.17% KOREA EM 2.25%KOREA EM 1.72% AUSTRALIA DM 2.14%BRAZIL EM 1.51% BRAZIL EM 2.14%TAIWAN EM 1.33% TAIWAN EM 2.04%SWEDEN DM 1.17% RUSSIA EM 1.59%HONG KONG DM 1.14% SWITZERLAND DM 1.58%SPAIN DM 1.07% MEXICO EM 1.28%NETHERLANDS DM 0.89% SOUTH AFRICA EM 1.19%SOUTH AFRICA EM 0.83% SPAIN DM 1.12%INDIA EM 0.81% HONG KONG DM 1.12%ITALY DM 0.77% INDONESIA EM 1.10%RUSSIA EM 0.68% ITALY DM 1.07%SINGAPORE DM 0.65% SWEDEN DM 1.05%MEXICO EM 0.64% TURKEY EM 0.98%MALAYSIA EM 0.43% MALAYSIA EM 0.92%BELGIUM DM 0.43% NETHERLANDS DM 0.91%DENMARK DM 0.42% THAILAND EM 0.85%96.72% 72.52%
    • 6. Other Asset ClassesOther asset classes are going to be more importantas well, because:In a ‘Globalizing’ world that will be dominated by ‘risk-related’ factors for some time to come, the quest for lowercorrelations and diversification makes new asset classes ornew countries participating within a certain asset classvery important.Example 1 – Emerging Markets Debt (especially localcurrency)Example 2 – Frontier Markets DebtExample 3 – Private Equity EMExample 4 – Islamic Finance
    • 7. Complicating FactorsComplicating factors in a Changing World are:The Shale Oil and Gas RevolutionImpact on Prices?Impact on Relative Strength of countries in Energy Sector?Chinese Energy Demand?This all in an environment of increasing Energy VolatilityChanging Relative Strengths:Western Governments have no money or the countriesless growthFinancial institutions in West in troubleGrowing importance of institutional investors, but theysuffer from liability issues and mortality risksIncreased role SWFsBeware of the money flow back into Dev CountriesRearview Mirror Policies of Western GovernmentsIslamophobia and other Foreign Biases
    • 7. Complicating Factors 2
    • 8. ConclusionsShould we do more in Emerging and FrontierMarkets?For the average attendee:YESBut don’t rushUse your brainBRIC?Not really that exciting anymore, maybe with theexception of India (lt)And/orSmall/MicroCapOther EM/FMYes, especially some of the more populous countriesincluding some FMsDon’t forget distressed, undervalued opportunitiesin Dev Markets plus those that fit the agenda of thecash-rich EM/FMOpportunities in the Financial Sector and in EuropeLast but not least:Don’t underestimate the US, at least not yet!
    • Questions and ContactLMG EmergeErik L van Dijk (CEO/CIO)Newtonlaan 1153584BH UtrechtThe Netherlandserik.vandijk@lmg-emerge.comTel. Office: +31 30 210 6166Tel. Direct: +31 6 155 86 109