Peter's Perspective
31st January 2014 by Peter Churchouse

Not All Emerging Markets are Turkeys

The story of the year so far is the aggressive sell-off we are witnessing in Global Emerging Markets…

Several readers have asked if this affects our bullish view on the Philippines which we espoused in our December 2013 issue of The Churchouse Letter (then the AHA Report).

The answer? No. It does not.

As we wrote then:

“The upside potential remains intact. But equally importantly, I see the downside as well-protected. Why? Because of these factors: low dependence on exports, excellent currency reserves, falling external debt, a large current account surplus, a steady stream of money sent bank home from abroad, increasing government infrastructure spending and a tremendous demographic profile.

Don’t get me wrong; if and when the Fed pulls the plug, or if we see a sharp correction in the U.S. then ALL markets will suffer. But the Philippines is a uniquely positioned high-growth emerging market story that offers real buffers to
help cushion any down-side.”

To demonstrate this point we include a chart showing a range of Asian and Global EM MSCI Equity ETF’s for the year to date.

(We use the major country ETF’s as these represent our USD investible returns as opposed to straightforward equity indices which are not necessarily accessible to overseas investors.)

MSCI Emerging Market ETF Year-To-Date Performance: Indexed to 100
Thus far, the Philippines has clearly held up extremely well in the face of a very aggressive EM sell-off.

We are expecting this resilience to continue, especially with the Philippines posting a 4th quarter 6.5% year-on-year GDP expansion despite the devastating Typhoon Haiyan and Bohol earthquake.

Our bullish case remains intact.

Good Investing,

Peter

P.S. For more specific investment recommendations, try a 50 day risk-free trial of The Churchouse Letter.

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