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Where Europe's biggest fund manager is putting its cash

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Amundi Asset Management favours India, Russia and Chile among emerging markets and likes stocks and bonds in China, Indonesia, Czech Republic, Brazil and Peru.

Singapore

EUROPE'S largest asset manager favours India, Russia and Chile among emerging markets, arguing they fare better against those with weaker fundamentals and political risks amid an expected global slowdown.

Amundi Asset Management, which oversees the equivalent of about US$45 billion of developing-nation assets, also likes stocks and bonds in China, Indonesia, Czech Republic, Brazil, and Peru, Pascal Blanque, group chief investment officer, said in an interview in Singapore.

They offer high-yielding currencies with sustainable levels of debt and earnings growth as well as the monetary and fiscal capability to counter a cooling of their economies, he said.

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Amundi joins Morgan Stanley and Goldman Sachs Group Inc, which are bullish on emerging markets that are making a comeback after suffering their biggest losses in three years in 2018 amid optimism over easing trade tensions and less hawkish Federal Reserve. There are the bears like HSBC Holdings Plc that are arguing growth in developing economies have been disappointing and needs to improve to justify higher returns.

"The two macro threats - basically the dollar and higher interest rates coming from the US - are diminished and they are behind us, " Paris-based Mr Blanque said.

"There is room moving forward for an appreciation of most currencies in the emerging-market space. So this is a piece of good news."

When it comes to markets to avoid, Amundi is looking at the balance-of-payments as a key metric, shunning Turkey and is guarded on South Africa and Argentina because of their deficits, Mr Blanque said. Countries such as Argentina, South Africa and Nigeria also face risks from the upcoming elections, he said.

Below are some of Mr Blanque's views shared in the interview:

  • Emerging markets were the first to be hit by higher interest rates and a stronger dollar 10 months ago. They would be the first to emerge as an opportunity Amundi favours countries where central banks have scope to cut interest rates to counterbalance signs of a slowdown "Assuming that we don't enter recession in the US, slowdown is good news."
  • A full-blown recession would be a challenge for emerging markets. Earnings growth in emerging markets could be in the region of 5 per cent to 7 per cent on average this year. Amundi has rebalanced portfolio to domestic versus trade-related themes in equities portfolios.
  • On the US-China trade talks: "I'm not expecting something really bad. At the margin I would expect probably more positive signs than feared," said Mr Blanque,
  • The firm is cautious on Mexico because of the issue on the border wall, which could have "bad outcomes" such as the deterioration of relations with the US.
  • Not worried over India's elections as fiscal reforms are on track. BLOOMBERG