John Ewart, Investment Manager of the Aubrey Global Emerging Markets Fund has recently been looking into new opportunities in India, South Africa, and Turkey, as he feels these countries are showing signs of promise while capturing investors’ attention.

He feels that a positive shift in government leadership and pro-business policies in South Africa and Turkey, combined with India’s ongoing market growth, offer compelling prospects for economic recovery and growth. He’s asked me to share his most recent thoughts with you via a comment.

“Looking at the wider emerging market universe, we see a number of new opportunities that have appeared in recent months. This year has been a busy year for elections within the AGEM arena, and we have written on and commented on India in particular, given the positive view we have for that market and for the outlook for many of our holdings.

It’s been encouraging to see the new government, the government for national unity in South Africa, including the Democratic Alliance, which have a pro-business, pro-reform, and pro-economic outlook for the country. In our opinion, this has been missing from the ANC-led government in previous years, and even President Cyril Ramaphosa has now indicated he wants to see South Africa turned into a building site.

Perhaps extreme, but if this is a catalyst to generate economic growth in excess of 2% for a number of years, that would be a positive, given that statistic has not been recorded in South Africa since 2013. We are revisiting names that we have met in the past, have owned in the past, whose management teams we respect, and businesses where we actually think that the outlook could surprise positively if these catalysts deliver improved economic growth, improved consumer confidence, and ultimately a willingness on behalf of the consumer to spend more of their hard-earned cash.

Another country of note which is drawing our attention is Turkey. President Erdoğan has not been praised for his economic influence in the country in recent years; indeed, the appointment of his son-in-law to the post of finance minister in previous years was certainly considered to be an error on his part.

The current position is occupied by Mr. Şimşek, who has an extensive career not only in the world of finance but also in the world of government; indeed, he was the Deputy Prime Minister from mid-2015 to late 2018. Tackling inflation has been his focus. Interest rates in Turkey are currently at 50%, and the most recent inflation rate for July was in excess of 60%.

The positive outlook encourages us to revisit expectations for Turkey. Inflation is expected to decline to 25% next year, and interest rates would subsequently decline. A reduction in inflation and interest costs should be positive for the consumer, and yet again we are revisiting names we have owned in the past, management teams whom we rate highly, who have had to be good business operators to survive the challenges of Turkey in particular in recent years, and who we think would be well-positioned to benefit from this improvement in consumer sentiment.

Whilst our optimism for India has been well documented and has been rewarding for our investors, we do keep an open mind regarding opportunities in other areas. The Q2 results season across the Aubrey GEM portfolio has been encouraging and indeed has been rewarding for a number of our holdings. But we have to look to the future, broadening our net to include countries where we have invested previously, where we think there is a catalyst for change, and where we see good businesses with attractive valuations as part of our process.”





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