Henderson’s Palmer: Three emerging markets to watch in 2012

Brazil, Russia and South Africa are among the developing markets poised to avoid the economic problems blighting the West next year, according to Henderson’s emerging market equities director.

Chris Palmer, the manager of the £242.1m Henderson Emerging Markets Opportunities fund, highlights the three countries as having a strong chance of enjoying an upturn over the course of 2012.

“In the case of Brazil, we are encouraged by the recent easing in monetary policy and the relaxation of certain financial taxes which had discouraged foreigners from purchasing equities,” he says.

Palmer adds that consumer-related companies and the energy sector are the main areas of interest in the country.

Earlier this week, the Centre for Economics and Business Research (CEBR) said Brazil has overtaken the UK to become the world’s sixth largest economy. Brazil expects its economy to have grown by 3.5% in 2011 and future boosts could come from hosting the Fifa World Cup in 2014 and the Olympic Games in 2016.

Palmer also says Russian equities have a good chance of improving next year thanks to low valuations, stable commodity prices, evidence of an improving attitude towards foreign direct investment and the possibility of financial market reform.

The Russian natural gas industry is a sector of particular interest for Palmer, as there is “significant evidence” that private investment has been bolstered by recent deregulation.

Looking to South Africa, the manager points out that strong domestic demand is helping to maintain the returns of consumer-facing businesses in sectors such as retail and basic food products.

“With global emerging markets trading on approximately 10x forecast earnings for 2012 [as of November 30), and despite many downgrades to consensus earnings expectations in recent months, we still expect 2012 to show positive earnings growth for global emerging markets equities overall,” Palmer concludes.

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