China's plunge has emerging market funds looking closer to home
By David Randall, Ross Kerber and Tariro Mzezewa
NEW YORK/BOSTON Aug 24 (Reuters) - With Chinese stocks down nearly 9 percent on Monday and Latin American countries already hurting, some top-performing emerging market fund managers are throwing in the towel when it comes to playing once-hot overseas growth stories.
Instead, the managers are increasingly focusing on countries that can draw strength from the solid but not spectacular U.S. and the eurozone economies.
Fund managers from Federated Investors Inc,, Wells Fargo & Co and Wasatch say they have been moving more money to companies in Mexico, Poland and India after China's stock market began crashing in June.
It's a stark reversal from the past several years, when the prospect of high levels of growth and attractive demographics convinced many fund managers that China and Latin American countries like Brazil were set to outperform for years to come.
"It's all about defense right now," said Scott Thomas, co-portfolio manager of the $1 billion Wasatch Emerging Markets Small Cap fund.
Thomas, who said he is "very underweight" China, has been selling his stakes in Chinese banks and buying Mexican financial companies like Credito Real. Mexico has a fraction of the commodity dependency as China and Brazil, Thomas said, while it sends approximately 80 percent of its exports to the United States.
Geoffrey Pazzanese, co-portfolio manager of the $13.5 million Federated Emerging Markets Equity Fund, said that he, too, was moving money into Mexican companies such as Wal-Mex, the Mexican division of Wal-Mart Stores . He also is starting to move money into Russia, which has been hurt by the decline in oil prices and a plunge in the value of the ruble to seven-month lows, after having no assets invested in the country earlier this year.
"At some point you will see a bottoming of oil prices in Russia, and it's starting to look like a good time to move" as growth accelerates in Western Europe's economies, he said. Continuación...