Connect with us

Investing

Investment opportunities in Emerging Markets

IPC Expands GreenKey Partnership, Striking Financial MarketsSoftware Co-development Agreement

Sean Thompson, Managing Director of CAMRADATA

In the past when investors considered Emerging Markets, they have been wary because things like pot holed roads, cheap plastic toys and corruption have often sprung to mind. However, this mind set is changing.

Sean Thompson

Sean Thompson

Economic growth in some Emerging Markets is faster than growth in many advanced economies and, more billionaires are being created in emerging economies than developed ones.

With most of the world’s population housed in emerging markets, most of which are very rapidly becoming consumers, we are probably on the cusp of a high octane new industrial revolution on a scale the world has not yet experienced.

Asia has a major role in the emerging spectrum, powered by the twin powerhouses China and India but healthy growth in smaller economies has also contributed to Asia’s surge.

Nevertheless, historically many investors have favoured a home-country bias, tilting their allocations towards what’s familiar. However, through greater education and opening of minds and borders, this bias is shifting and enabling opportunities for investment because companies are no longer being viewed purely on their current status, but how they might look in five to 10 years from now.

Emerging market countries are potentially better positioned today to withstand increasing funding costs of debt, as a result of improved external imbalances and a more stable debt profile.

Furthermore, public debt levels in some emerging market countries could be said to look more favourable when compared to developed markets.

But how can investor’s best enhance investment opportunities across the equity, debt and small cap spectrum?

Economic growth vs stock market returns

Firstly, it’s important to consider the relationship between economic growth and stock market returns. This can throw up many questions on the foundations of strategic asset allocation; how managers (and consultants) derive expected returns; and country versus company influences.

Many managers claim to be benchmark-agnostic, but often Emerging Markets managers are making mere tilts away from the benchmark index rather than genuinely independent portfolio construction. The index benchmark is the opportunity cost regardless of whether the manager likes the index or not.

When it comes to addressing the question of stock markets’ relationship with economic growth, generally stock market wealth has followed emerging economic growth, with the notable exception of China. For post-industrial, rich nations, the theory is no longer relevant. But even in emerging markets, there are complicating factors.

For example, over the last ten years the GDP of Emerging Markets has doubled but investors could be robbed of years of bountiful returns by currency falls overnight.

One way to better align investments with GDP was to cast aside the benchmark and concentrate on countries and companies that followed the “well-trodden path” of secular socio-economic improvement.

Anomalous classification

Investors need to consider the anomalies in classifying Emerging Markets too.  Samsung is a popular example of the anomalies in classifying Emerging Markets. South Korea is ranked the 11th biggest economy globally but somehow not a Developed Market according to index providers.

This puts the relationship between GDP and stock market returns back into focus. Analysing the likes of Samsung does not involve political risk but instead very much the dynamics of the relevant global industry.

On the other hand, looking at a Frontier Market like Rwanda, where there are potentially only two stocks to invest in – a brewery and a bank – then the macro conditions account for at two-thirds of the influence on stocks.

The smaller the stock exchange and its constituent stocks the more the influence of macro- economics.

However, one myth that no longer stands is that foreign investors need to be in the market to make it investable. A far more relevant criterion is local bank rates. For example, if locals are getting 15% for money on deposit, then there is not much incentive to equity investing. But as rates come down then equity markets re-rate upwards.

This this is why debt can be a more attractive way to play Emerging Markets. Over time, Emerging Market equities and debt have delivered similar returns but said there is a compelling entry-point to Emerging Market equities today after a decade of poor returns relative to developed markets.

Buying in China

Despite a recent slowing down of the Chinese economy, China continues to have one of the fastest rates of economic growth in the world, adding the equivalent of “another Australia” each year[i]. But investors need to be aware that China is an anomaly.

It’s a country where equity investors have not enjoyed great returns commensurate with its economic growth. The narrow Chinese equity index performance has been lacklustre because the Chinese government has only permitted foreign investors to buy into a select, few State-Owned Enterprise stock, not the guts of the economy.

This is a market where appointing local specialists is key, as local knowledge is essential to invest wisely in China and avoid the pitfalls. Local retail investors dominate en masse and even mutual funds, supposedly run by professionals, behave like retail. This makes for a momentous market.

Some predict that the future for China is select – but perhaps not with those companies currently investable. Looking at FANGS (Facebook, Amazon, Netflix and Google, now Alphabet, Inc.), they have drawn capital from Emerging Markets. Only China can follow that U.S. model.

In the future it is possible that about ten companies, championed by the government there, will draw all the money. China, like Japan before it, is therefore likely to then merit its own allocation (and index) within capital markets in the future.

Whatever the future holds, no other country is poised to have as much impact on the global economy over the next two decades according to the World Bank[ii] who suggest that even if China’s growth rate slows as projected, it would still replace the United States as the world’s largest economy by 2030.

Investing

Risk Mitigation & The US Election

We need to talk about the election.

For the past four months, news cycles have been dominated by the COVID-19 pandemic. It is easy to forget that, for investors, the November US election was to be the defining issue of 2020. The winner will potentially impact the direction of travel of investments, regulation, corporate earnings and balance sheets for at least the next four years.

Sign up for the free webinar on the US Election & Risk Mitigation live on August 12th at 12pm EDT

Key takeaways:

  • Learn how to protect your assets against the risks posed by the US election
  • Understand how Chief Investment Officers are adapting to the United States’ political landscape to gain a competitive edge
  • Identify investment opportunities in this uncertain time

We will be joined by:

  • Shannon Saccocia, Chief Investment Officer, Boston Private
  • Stephanie Link, Chief Investment Strategist, Hightower Advisors

Sign up for the free webinar on the US Election & Risk Mitigation live on August 12th at 12pm EDT

If you can’t make it, sign up and I will send you the recordings.

 

Kind Regards,

Marek Razzouk

Research Lead, Financial Services

Investment Summit by Reuters Events

Phone: +44 7748655237

Email: [email protected]

Investment Summit by Reuters Events is part of Thomson Reuters.

Investment Summit by Reuters Events is the central hub for investment executives. Through in-depth industry analysis, targeted research, niche events and quality content, we provide the industry with a platform to network, discuss, learn and shape the future of investment.

Continue Reading

Investing

The impact of a recession on your pension

The impact of a recession on your pension 1

By James Turner, Director at Turner Little 

The stock market is beginning to show signs of life as measures introduced to help businesses amid the pandemic begin to take hold, but much is still uncertain. There’s no doubt that the pandemic has affected most people’s finances. From the Bank of England’s decision to reduce its rates, to the potential loss of earnings for people forced to remain at home, there is much to contend with.

“Naturally, at times of economic uncertainty such as these, people fear their retirement pots will be wiped out. For most people, their pension is one of the most valuable assets they hold,” says James Turner, Director at Company Formation Specialists, Turner Little.

So how could the continued pandemic and impending recession affect your pensions?

“If you have a defined contribution pension, your savings have probably been hit hard as a consequence, because pension schemes invest in the stock market, so big rises and falls can have an impact,” says James.

James Turner

James Turner

“It is important to remember that pension savings, as with any investment, is usually long-term. If you’re young, there’s still time for markets to recover before you take your pension, but if you’re close to retirement, there is the potential that your pot could have taken a bigger hit,” he adds.

Pensions are typically invested in stocks and shares, bonds, property and cash. If you’re concerned about its value, most schemes now have online platforms where you can see how your investments are performing.

“It’s important to treat your pension as an asset, and asset protection is all about planning. Effective planning ensures that no matter what happens, you will remain in control of your assets,” says James.

If you’re interested in finding our more about asset protection and would like to discuss your specific requirements, get in touch with us today. Our specialist team of experts will deal with matters pragmatically and sensitively, taking the time to meet with you and discuss your individual objectives in detail, in order to provide solutions that are uniquely tailored to your needs.

Continue Reading

Investing

The Business Case for Sustainable Wealth Creation: A Conscious Mindset Approach

The Business Case for Sustainable Wealth Creation: A Conscious Mindset Approach 2

By Mirjana Boznovska

The scale of the planetary crisis is so big that a fundamental shift is needed from business leaders and all stakeholders including investors, human resources as well as consumers. There is a new way of thinking emerging, one that is shaping the future of sustainable wealth creation with a focus on conscious mindset.

Humanity’s prosperity is linked to expanding our definition of wealth to include a respect for the environment and empathy for others. All of these come together and are the source of true innovation. Our future depends on learning to create wealth in sustainable ways.

Money and wealth are tools which help create opportunities. Opportunities for those who have it to do “good” in their environment, their community and globally. Serving society is the most inspiring and never-ending source for economic activities, creating value for humanity.

Sustainable Wealth

Sustainable wealth is future benefit that sustains future life. Sustainable wealth means consumption or the using up of benefits must equal additional investments that increase wealth, so wealth is maintained and sustained. When the spiritual dimension of wealth is interjected in the economic equation, physical wealth expands on two counts: a) there would be a lowered desire to consume materialism and b) the spirit of service would inevitably lead to increased wealth. Balancing ecological and economic consideration is an acceptable short-term goal of co-creating sustainable wealth, but in fact ecological restoration must be the long-term goal.

This would be possible only when unsuspected sources of clean energy are tapped and scientific research in ecological restoration is pursued. This is one way of looking at co-creating wealth that can help humanity pay back its ecological deficit. It’s about creating value without destroying value. The systems we create need to serve all individuals and the system itself.

Today our systems are increasingly feeding only the super-wealthy, and everything we understand about the human psyche is that we are creating a class of super selfish, super greedy people who take at the expense of individuals, society and our ecological systems. The depletion of social and environmental capital weakens our social systems. The world is interconnected, and different parameters are having an impact on our lives, our profession and on the worldwide economy.

The question that arises is how can we as an individual and as part of the global economy create sustainable wealth, balancing economic and ecological priorities?

The question is closely depending on how we start and manage a sustainable economy based on strong and long-term industry. The global economy remains market-centred, even though the evidence has been mounting that these markets are failing us and the planet. Tweaking this model isn’t good enough We need a new paradigm which will provide a new theory that fits our unfolding reality, a new environment-centred economics that can maximize not profit alone but the well-being of living things – it’s about conscious business which requires conscious leadership.

The Three P’s

Conscious business supports the idea of the three P’s: People, Profit, Planet. The authentic motives behind such choices are self-mastery, love, care and the desire to serve.

What is Business Sustainability? Business sustainability is often defined as managing the triple bottom line, a process by which businesses manage their financial, social and environment risks, obligations, and opportunities. We can extend this definition to capture more than just accounting for environmental and social impacts. Sustainable businesses are resilient, and they create economic value, healthy ecosystems, and strong communities. These businesses survive external crisis because they are intimately connected to healthy economic, social, and environmental systems. They require conscious leadership with a conscious culture and conscious service. A paradigm is a set of interconnected ideas that have a logical cohesion.

The Business Model for the 21st Century

In most discussions about the business case for sustainability, the emphasis has been on the bottom line. The value of sustainability has been analysed from every direction—revenues, profits, and share prices. However, sustainability is more than just about firm-level benefits. Businesses, business schools, and society recognize that the current course of production and consumption cannot be sustained within our natural resource limits.

Businesses develop the products and services consumed by individuals around the world. The vast resources extracted by business for society’s use have created waste streams that find their way into our land, air and water and compromise human health. New businesses are being built on an understanding of the problems that have emerged through the 20th century. Increasingly, old businesses are evolving to use fewer resources, intensify the resources they do use, and renew and reuse the products they sell. New relationships are forming between businesses as firms realize synergies from interdependence; one firm can profit from another’s waste, or several firms can benefit through flexible supply chain relationships built on common interest.

The 21st century is revealing a new paradigm in which business is no longer separate from society. Realizing the new “business-as-society” paradigm will require the efforts and ingenuity of organizations across sectors and industries. It will challenge the current generation of business leaders to apply their hard-won knowledge to novel problems, and the next generation to evolve into conscious leadership and address issues of unprecedented importance and complexity. Those businesses that identified the hurdles and challenges described in this article, along with those businesses that aim to overcome them, will help to shape this new business landscape. The concept of sustainability is undeniably compelling.

Let’s consider for a moment the move towards a paradigm whereby the business decisions were aligned with the best ecological decisions, ie conscious business and conscious service. The business case for sustainability draws on several core arguments. Pro-environmental practices create positive brand associations among consumers, politicians, and regulators. They also anticipate regulatory trends and position the company favorably when such policies become law. The mindset shift required that seeks to further efficiency in materials and waste carries over into other realms of conscious leadership. Similarly, the innovation required to overcome environmental challenges promotes innovation generally. And employees have high morale when they believe in what their company is doing.

However, there are still many barriers to sustainable wealth creation as it would appear. When we take a step deeper into the definition of service, fear usually comes up, uncertainty, and a moment of self-definition. Who am I and what do I serve? Whether inside or outside the business world, the same questions arise.

“It doesn’t fit the business model” or “How are we supposed to measure the impact” are common examples of why it requires a mindset shift to start building sustainability from supply chain activities to HR practices.

Mirjana Boznovska

Mirjana Boznovska

Ordinarily such principles fall into the realm of self-awareness, self-mastery, and spirituality, separate from, and opposed to the world of commerce. Essentially a desire that comes from within, to have a positive impact and make a difference in the world which comes from the highest calling to serve. Leaders seem conflicted. It is time for this separation to end. Everyone, even the most jaded corporate executive, yearns for it on some level, yearns to align his/her productive life with his deepest care and highest values. Essentially it is the human condition, that we each want to know that we have made a positive difference in the world. This does not mean to ignore business realities and throw caution to the wind. It means to take the next, slightly scary, slightly outrageous, next step. It is the step for which there is no credible “business case.” It comes from a different motive – it comes from within.

In fact, the “business case for sustainability” does hint at something true. When we take a step into service, the world eventually reciprocates our generosity, albeit in a form and timing that is impossible to predict. A business “case” involves numbers and predictions, but the general principle that it is trying to convey is that the gift moves in a circle. As you do unto the world, so, in some form, will be done unto you.

To take this next step always requires at least a little courage, because it goes against familiar practice and predictable financial self-interest. Someday, hopefully soon, we must change the business environment to end the opposition between profit and ecological well-being and promote the alignment of ecology and money.

Herein lies a vastly different sort of “business case” for sustainability. It comes from questions like, “Who are you, really?” “What do you care about?” and “What do you serve?” “What are your values and belief systems?” “What is your unique self-expression you bring to the world to serve others?” From a deep consideration of such questions, courage is born to overcome the hurdles.

Hurdles to Overcome for Business Sustainability

  1. Measurement of sustainability.

Sustainability initiatives can be particularly difficult to measure because they often affect people and society at a macro level, and their organizational implications are unclear. Further, their impacts are not immediately obvious, and they depend on who implements them and how. Many suites of metrics and measurement systems—such as the Global Reporting Initiative, ecological footprint, and life-cycle assessment—currently exist to help managers measure their sustainability. Government policies need to incentivise outcomes and be more clearly connected to sustainability. Governments have several tools at their disposal, such as taxes, regulations, and markets, to encourage businesses to steward environmental resources.

  1. Consumer choices do not consistently factor sustainability into their purchase decisions.

Understanding how consumers value sustainability in the context of other product attributes would help businesses develop products that meet their needs. Further, there may be a role for business in educating consumers on issues and product attributes, resulting in more informed purchasing decisions. It also applies to investors. Shareholders and lenders must decide where to invest their money. How do they choose between different companies, which requires trading off one set of corporate attributes for another? Understanding how people make trade-offs will help businesses make sustainable choices.  

  1. Sustainability still does not fit neatly into the business case.

Companies have difficulty discriminating between the most important opportunities and threats on the horizon. Better guidelines are needed for engaging key stakeholders,

  1. Research shows employees would rather work for sustainable firms—and some would even forego higher earnings to do so.

Firms must better leverage this knowledge to attract and retain the best employees. These mechanisms should allow firms to leverage their sustainability initiatives and values, building the right capacity internally and ensuring progress is made towards sustainability goals.

  1. Current financial decision-making does not fully capture the value of sustainability-related investments.

These investments are often based on long-term and intangible rewards, whereas many investments made are based on the short-term impact on the bottom line. Sustainability managers need to be well informed exactly how returns on sustainability investments can be measured and seen. What are the short-term and long-term ways to assess and justify these investments? How can sustainability executives demonstrate the value of sustainability within the decision-making language and framework of finance executives? Until sustainability becomes accepted as a legitimate—and value-creating—activity, it may lose out to projects that are more easily understood and evaluated.

  1. Businesses need guidance on how to evaluate the materiality of an issue, both for disclosure purposes and for strategic planning.

Equipped with an understanding of which risks and opportunities are most material to their organization, managers can then prioritize material issues, translate them into internal strategies, and communicate them to stakeholders. There is no common set of rules for sourcing sustainably.

  1. Businesses want to purchase products and services that are environmentally and socially responsible. But the process of identifying sustainable suppliers is not always straightforward, and the means for comparing products is not always obvious. Sustainable sourcing decisions may also require industry-specific knowledge and practices, or data that just may not be available. Identifying a set of best practices for sustainable sourcing would provide organizations with targets for benchmarking as well as guidance on managing their supply chains. It would also yield an opportunity for leading businesses to showcase their good practices.

The Old Money Paradigm and Why It’s Not Sustainable

While conventional investing only focuses on the traditional risk and returns considerations in making investment decisions, socially responsible investing considers other ethical factors .The world needs to focus on mutually beneficial partnerships, fostering sustainable development across the continent, targeting the continent’s inhabitants as its primary consumers. Reports such as one published recently by the Business and Sustainable Development Commission, show that sustainable business is an untapped $12 trillion opportunity, making sustainability the most lucrative business sector there is.

What Is Money? Why Was It Created?

Money, in some way, shape or form, has been part of human history for at least the last 3,000 years. Before that time, historians generally agree that a system of bartering likely used. Money derives its value by virtue of its functions: as a medium of exchange, a unit of measurement, and a storehouse for wealth. It is merely an exchange of energy.

A New Paradigm Shift in Wealth Creation

Creating and amassing wealth is more than just a necessity. For centuries, the practice of climbing the ladder to richness has led to wars, influenced literature, and shaped cultures. Whether wealth comes in the form of money or food, all civilizations have pursued it.

The system of wealth creation is based on the current worldview, which in turn is based on the way science is studied and perceived. Most people will not be aware of existing paradigms of wealth creation. They will be too busy accumulating and creating wealth rather than being concerned with the process which they and their wealth underwent.

The paradigm is all about teamwork – to create wealth, everyone must help each other succeed. No longer are the lesser indebted to make the greater richer. Everyone has to run the race, but everyone must hold hands to reach the finish line together.

Sustainable Wealth Creation addresses three very important questions:

  • Do financial statements accurately reflect a company’s position?
  • Do shareholders have protections and adequate controls?
  • Can company leadership make decisions confidently?

Sustainable Wealth Creation principles help answer these important questions by investigating the accounting, legal, regulatory, adjudicative, and economic structures of a country.

Economic systems change at a surprisingly fast pace. Since the information varies over time, the information needs to be monitored and refreshed to gain important insights when making investment decisions involving international equities.

An iceberg is a metaphor for traditional investment analysis regarding international equities. Most international analyses parallel domestic analyses by focusing on the traditional metrics that are akin to the visible part of an iceberg. The hidden information is like the submerged portion of an iceberg. It is key to success (or even survival) but not readily discovered.

What Lessons Are You Teaching Your Children About Money?

Modelling a way of being to our children.

If you don’t take the opportunity to educate your child how to manage money, the value of money and sustainable wealth creation, somebody else will. They will fall within the collective way of thinking. Conscious parenting involves sharing with our children the awareness of our environment, our power of choice, personal responsibility and self-mastery.

Continue Reading

Call For Entries

Global Banking and Finance Review Awards Nominations 2020
2020 Global Banking & Finance Awards now open. Click Here

Latest Articles

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 3 What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card 4
Banking17 hours ago

What does the future hold for accessing earnings? Introducing the world’s first Earnings on Demand payment and debit card

By James Herbert, CEO & founder, Hastee Let’s begin by looking at how our brains are wired. Think about the hunter-gatherer mindset: when...

Board-Level Risk Oversight Deserves Renewed Attention Board-Level Risk Oversight Deserves Renewed Attention
Investing21 hours ago

Risk Mitigation & The US Election

We need to talk about the election. For the past four months, news cycles have been dominated by the COVID-19...

Honest services wire fraud and the need for caution on multilateral development bank projects 5 Honest services wire fraud and the need for caution on multilateral development bank projects 6
Business21 hours ago

Honest services wire fraud and the need for caution on multilateral development bank projects

By Joshua Ray, Legal Director, Rahman Ravelli www.rahmanravelli.co.uk A recent court case extended US prosecutors’ extraterritorial reach for tackling corruption....

Teaching children about wealth management and why there has never been a better time 7 Teaching children about wealth management and why there has never been a better time 8
Finance22 hours ago

Teaching children about wealth management and why there has never been a better time

By Annabel Bosman is Managing Director and Head of Relationship Management at RBC Wealth Management As we approach the end...

Do your contracts and policies stand up to the Covid-19 test? A view from the UK 9 Do your contracts and policies stand up to the Covid-19 test? A view from the UK 10
Business22 hours ago

Do your contracts and policies stand up to the Covid-19 test? A view from the UK

By Amy Cooper of Ius Laboris UK firm Lewis Silkin The coronavirus pandemic and lockdown have stress-tested employment contracts and policies,...

Going branchless: How banks can keep customers coming through the virtual doors  11 Going branchless: How banks can keep customers coming through the virtual doors  12
Banking22 hours ago

Going branchless: How banks can keep customers coming through the virtual doors 

By Richard Kelsey, Head of Software Sales at Backbase Though you might be familiar with the popular seaside town of Newquay,...

Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector 13 Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector 14
Business1 day ago

Board Report Highlights Complex Decision-Making Process Across Banking and Finance sector

‘The State Of Decision-Making’ report from Board, reveals business decisions made in silos without modern planning tools A third (33%)...

EaseUS Free Data Recovery Software Recover Lost And Erased Documents 15 EaseUS Free Data Recovery Software Recover Lost And Erased Documents 16
Technology2 days ago

EaseUS Free Data Recovery Software Recover Lost And Erased Documents

Have you anytime inadvertently masterminded erased or lost data from your work territory or PC? In case along these lines,...

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020 18 Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020 19
Banking2 days ago

Shawbrook Bank “cautiously optimistic” as it Publishes Half Year Report for 2020

Financial performance impacted by the pandemic Expected credit loss (ECL) charges of £45.8 million recognised on loans and advances to customers...

Shining a spotlight on operational resilience and cyber-risk in financial services 20 Shining a spotlight on operational resilience and cyber-risk in financial services 21
Technology2 days ago

Shining a spotlight on operational resilience and cyber-risk in financial services

By Miles Tappin, VP of EMEA for ThreatConnect, explores why the financial services industry must build a cyber security strategy...