Anyone into Emerging Markets

[Pat Riley]

Ola.

Had me plans changed for me at the last moment. Not sure whether I used to prefer doing me own plans or not, but anyway, I don't have the option now. So London is a another week or so off (any pub meets planned?) and I've got a free day to while away, which I intend ta do magnificently of course.

But, while I'm here, is anyone else looking at Mexico as a solid buy? If it in its entirety was a commodity I'd buy big. It's massively discounted to value and I'd be looking to grab as much as I could put in me saddlebags.

It also has a couple of additional advantages other than potential excess value.

It's pitching itself as a viable off-shoring financial destination, with sufficient legal framework to ensure risk is no greater than any eurozone base, but without the paperwork or forced disclosure that's hamstringing the EZ and US at present. It's sovvies are really attractive.

And to the last point and talking of attractive - ya need take a gander at the girls out here. I have no idea why this place isn't on the grid for fun. Unless the selfish buggers wanted ta keep it for themselves. Truly stunning beauties.

But I don't know why I thought it would be hot and sunny cos it ain't. Humid it is though. Have ta find a nice place for a coffee and check out the scene. Have fun with ya screens. LOL.

 

[Jack o'Clubs]

'Into Emerging Markets?' Yes, absolutely, it's my bread and butter now. But equities rather than FI, sounds like you're looking at sovereigns? From the equity side as a market I think Mexico is pretty richly valued, although there are some stock level opportunities, mostly in the banks.

 

[Pat Riley]

This place is ridiculous. I've had a long trip and a long (fun) day and I'm turnin in, but all the fellas are just starting up for the night.

We need an office here. And I know exactly the fella I want out here runnin it.

 

[Pat Riley]

'Into Emerging Markets?' Yes, absolutely, it's my bread and butter now. But equities rather than FI, sounds like you're looking at sovereigns? From the equity side as a market I think Mexico is pretty richly valued, although there are some stock level opportunities, mostly in the banks.

Good man. Yeah, get ya on the premium on tier-1 equities, but there's a lot of value still to be factored in on the growth sectors. I'm not just fixed income, I'm looking at all angles - obviously, that's me business.

How long have ya been out here and do you trade other EMs?

 

[Jack o'Clubs]

Good man. Yeah, get ya on the premium on tier-1 equities, but there's a lot of value still to be factored in on the growth sectors. I'm not just fixed income, I'm looking at all angles - obviously, that's me business.

How long have ya been out here and do you trade other EMs?

Yep, all EMs, although spend more time on Asia than elsewhere. Equities though, not FI (nor FX, except insomuch as it effects the equity value). For 10 years on and off, but the last four exclusively.

On Mexico, the problem is that it is a perennial disappointer, so generally each year strategists do their scan across EM, see all the positives in Mexico (some you've noted, but also linkage to US recovery, beneficiary of strong dollar, reformist govt, etc), and name it as a top pick, and then as the year goes on GDP just gets revised down and down, which at the moment is happening as US GDP revisions are heading up. That would be fine, if valuations weren't already discounting the 'strong growth' that never seems to arrive. So in general I think it's a market to tread carefully in. Added to that you have the macro risk of one of the highest foreign ownerships of sovereigns across EM which, despite its relative defensiveness, does make it more susceptible to EM panics than it really should be. At 19x PE it's 2SDs above its own history, and is one of the most expensive EMs globally. Depending on how you can play it, do it at an index level and you're getting huge exposure to consumer (insufficiently cyclical) and telcos (ie AMX and a key target of govt monopoly reform plans). In the region, I'd prefer bargain hunting in Brazil once the election noise dies down.

 

[jotekfinance]

Make sure that you pick a solid place, though. Take a look at the drug news, and shootings, etc. You do NOT want to step on the wrong toes or want someone walking in wanting "protection" money (yes, it still happens there).