This news service visited wealth managers in Paris last week to discuss their wealth and asset allocation views. Despite concerns about the impact of the Middle East conflict, which has tested the resilience of emerging markets, many of which are oil importers, a number of wealth managers are remaining positive on emerging markets.
Kevin Thozet, a member of the investment committee at Paris-based
asset manager Carmignac, argues that
the resilience of the global economy has surprised
many.
“UK growth has surprised positively, and European growth has been
quite resilient. Switzerland is also holding well,” Thozet told
this news service in an interview. However, he does not
believe that growth will be as strong in the second part of the
year. He also does not expect a quick end to the Iran conflict.
“Increased energy prices do bite and bond yields are rising. Yet
the global economy is not expected to fall off the cliff,” Thozet
said.
The final three months of a year can be an important time for
wealth managers to adjust portfolios in the hope they can deliver
a positive outcome for client by a year-end. Geopolitical
volatility, the continued surge of AI, oil price gyrations and
changes in interest rates have given managers plenty to think
about since Janaury.
Like
a number of investment managers, Thozet is overweight in
emerging market equities, driven by undervalued Asian tech firms,
and underweight in the US and neutral on Europe. On Asia, 70 per
cent of which are emerging markets, he likes Taiwan, Korea and
Japan. He is invested in the Taiwan Semiconductor Manufacturing
Company (TSMC), SK Hynix and Samsung electronics. He also likes
Latin America stocks.
On European equities, he likes Italy, Spain and Greece, notably
financials, where there is decent growth. “Unemployment in Italy
is the lowest it has been in 15 years. Spain has more economic
growth than the US,” he said. In Spain, he invests in BBVA, for
instance. In Germany, he likes industrials and mid caps.
Nevertheless, Thozet does have a large exposure to the US, mainly
on tech which is more expensive than Asian tech, and his exposure
has remained flat this year.
On fixed income, Thozet said he has been selling off the US,
France and the UK and buying up Japan and the Japanese yen. He
has increased his exposure to Japanese long-term bonds and
European fixed income; he also likes Italian bonds.
In the same vein as
David Zahn at Franklin Templeton, Thozet highlighted how the
French economy is not doing well and there is little growth. The
cost of debt is increasing. Thozet believes that if Marine Le
Pen, France’s far-right National Rally party candidate, is
elected next year, the impact may not be so bad. “The scariest
for markets would be the far left,” he said.
Overall, Thozet said they are overweight in equities, underweight
in fixed income, although he has increased his exposure to fixed
income recently. Like a number of investment managers, he is most
positive on tech in emerging markets. He also likes US healthcare
and EU financials. He invests in the energy transition in
companies such as France’s Schneider Electric. He also
invests in French equites but not too much as they are
underperforming due to the political risk. Thozet did invest in
French luxury goods but he has reduced exposure there, although,
like other investment managers, he still invests in Hermès. On
defence, not so much there.
“Overall, we are positive,” he said. “We have equities in
portfolios. We are most positive on emerging markets and tech. US
healthcare, EU financials. We have some credit in portfolios. The
worst thing for investors is staying on the sidelines.”