Английский язык. Практический курс для решения бизнес-задач - Нина Пусенкова

1. Historically Low Valuations

Valuation levels are extremely strong for the emerging markets asset class and even more so for active, risk-controlled emerging markets portfolios, which have a single-digit price-to-earnings ratio, with attractive earnings growth forecasts. Overall, the emerging markets are the most attractively valued equities available to investors.

The emerging markets asset class is now selling at historically low valuation levels as compared to similar assets in developed markets. Based on P/E, valuations are currently half those of developed markets, compared to an average of 0.75 over the past 15 years. Such compellingly strong fundamental value cannot be ignored.

2. Economic Triggers – Near Term

Of course, valuations alone will not ensure strong equity market returns if there is no improvement in the underlying economic climate. However, markets are discounting mechanisms and tend to rise in advance of actual economic recovery. Emerging markets have been one of the more responsive asset classes in discounting economic change. We saw this in Mexico in the mid-1990s, when the stock market recovered well in advance of the actual turnaround in the economy and currency.

While the prospective economic recovery in the developed markets is likely to be more drawn-out and less active in the early stages than in past recoveries, the emerging markets are likely to gain significantly from a discounting of world economic recovery. This could start within the next 6 to 12 months, based on historical precedent.

In addition, areas within the emerging markets are actually among the few pockets of potential strength in global growth. Ironically, some of the currently stronger economic growth prospects would be the former command-and-control economies of China, Russia and central Europe. Most of the developed economies appear to have uncertain prospects for next year, especially the U.S. and Japan. The emerging markets, in contrast, appear better poised to recover, having experienced the downturn earlier and in many cases more severely than their developed counterparts.

3. Market Volatility Change as a Spur to Outperformance

In addition, emerging markets have historically shown good performance when global equity market volatility has reached a peak and then declined. Global market volatilities have continued at a high level after their September peaks, but a reduction of uncertainty regarding world political and economic issues could be expected to reduce volatility levels – which would be beneficial to emerging markets based on past patterns.

4. Economic Triggers – Long Term

Beyond the near-term triggers, there are some long-term economic and political developments that may be quietly laying the foundation for a sustained period of better performance from these countries. These would include the world’s increased recognition of the strategic importance of developing nations, new models for economic development that stress free markets and individual initiative, and evidence that nations that followed now-discredited approaches to development (such as the old Asian economic model) are already striking out on new paths.

In the aftermath of the September 11 terrorist attacks on the United States, there is a heightened awareness of the importance of key emerging markets in global security. Recently, the U.S. has stepped up economic assistance to supporters in the war against terrorism, including Pakistan, Egypt and Turkey. It seems likely that a greater degree of political partnership with these nations could well translate into greater investor attention, stronger capital flows and positive market performance.

It is also likely that there will be broader support for emerging markets globally, as their pivotal role in the new world order emerges. Potential political and economic instability in the emerging markets could create havoc for the world economy. The recognition that lack of economic opportunity provides a fertile breeding ground for terrorism are expected to solidify global support for measures aimed at reducing instability in the world’s developing regions. Greater stability would have a positive effect on emerging markets, reducing the risk premium and boosting equity values. Even a focus on just the largest markets would likely boost the overall asset class, as «big ten» alone accounts for over 60% of total emerging markets capitalization (based on the MSCI Emerging Markets Free index).

Another stimulus to the long-term economic performance of emerging markets is greater recognition of free, open, transparent markets in promoting economic growth. Despite the noisy protests of «anti-globalization» groups at recent multinational meetings, there is a growing consensus that economic development promotes personal freedom. Greater acceptance of the linkage between economic development, free markets and individual freedom is likely to increase over time, stimulating growth in emerging capital markets.

Leading economists with influence on emerging markets policymakers have been arguing that free markets solve problems most effectively. They show the importance of three key characteristics for growing economies – openness, macro stability and small government. Wider acceptance of these views can be expected to promote long-term, stable growth.

Evidence that this is already occurring can be seen in Asia. Asian companies and policymakers demonstrate a clear movement away from the old economic model that prevailed prior to the 1997-98 financial crisis towards a more open, market-driven system. The old model was one in which the consumer saved actively, banks lent carelessly, and borrowing corporations over-invested with poor returns. While creating the illusion of steady growth, this model was in fact unsustainable.

While the degree of progress towards a new Asian economic model varies from country to country, our observations confirm a general shift towards a framework where consumers spend more and borrow more. Lending institutions in turn have tighter lending standards, putting corporations into competition for capital and necessitating higher returns on investment. This new paradigm offers the prospect of more sustainable growth and higher valuations for investors.

5. Assessing the Long-Term Fundamental Case

The fundamental case for emerging markets investment remains sound. The two decades since these countries first made forays into the capital markets are only a short period in world economic development and a fleeting moment in history. Yet during this period emerging markets have come a long way in establishing sound fiscal and monetary policies, restructuring their economies, addressing corporate governance, and improving their economic fundamentals. Keeping this in mind, the potential for continued rapid, positive change in these economies and markets is still very strong.

Long-term fundamental positives for the emerging markets include:

– Large, rapidly industrializing populations

– Undervalued currencies

– Declining current account deficits

– Improving infrastructures

– Competitive wages

– Increased competition, reform and restructuring

– High savings rates

– Long-term propensity toward growth

Of course, emerging markets vary a great deal in their political realities, their cultural and national identities, and their legal and economic institutions. Many emerging market populations are still in poverty and lack the basic means for development. Great attention needs to be paid to understanding the multifaceted nature of these countries. In short, investment in these markets remains challenging. However, we believe that with use of a wide array of information and skilled application of disciplined analytical tools, it is possible to avoid troubled areas and selectively invest in high-return countries and companies.

6. Conclusion

We think investors should look past the current market anxiety and make a careful and objective appraisal of the present opportunities in the emerging markets. We believe this asset class will serve investors extremely well in the long term, and that the current valuations and outlook justify an increase now in emerging markets allocations for global fund sponsors. The current uncertainty, while uncomfortable in the near term, provides a classic long-term buying opportunity.

Source: Ronald Frashure, Charles Wang of Acadian Asset Management, 2003. www.oycf.org

Essential Vocabulary

1. magnitude n – величина, размеры; важность, значимость

2. World Bank – Мировой банк

3. International Finance Corporation (IFC) – Международная финансовая корпорация (МФК)

4. Gross National Product (GNP) – валовой национальный продукт (ВНП)

5. per capita – на душу населения

6. devaluation n – девальвация, обесценение

devalue v – обесценивать

7. contagion n – заражение (риск распространение финансового кризиса из одной страны в другую или риск того, что проблемы дочерних компаний перекинутся на материнскую)

8. default n – дефолт, невыполнение денежных обязательств, неплатеж, отказ от уплаты долга

defaulter n – сторона, не выполняющая обязательства, неплательщик, банкрот

default v – объявлять дефолт

9. systemic risk – системный риск

10. bull market – рынок «быков»

11. S&P 500 index – индекс 500 акций «Стэндард-энд-Пурс»

12. bubble n – пузырь (ситуация, когда конъюнктура поднимается до уровня, не имеющего объективной основы)

13.outlook n – вид, перспектива, вид на будущее, прогноз

14. downturn n – начало спада деловой активности или спада на рынке

15. risk premium – премия за риск

16. Morgan Stanley Capital International (MSCI) – Международные индексы капитала банка «Морган Стэнли»

17. pivot n – основа, опора

pivotal a – основной, опорный

18. policymaker n – лицо, разрабатывающее или претворяющее в жизнь политику

19. saving n – зд. сбережение

save v – зд. сберегать

20. fiscal policy – финансовая политика (бюджетная и налоговая)

21. monetary policy – денежно-кредитная и в некоторых случаях валютная политика

22. fundamental n – фундаментальный (базовый) фактор

fundamental a – фундаментальный

23. current account – текущий платежный баланс, текущий счет

24. propensity n – склонность

Exercise 1. Answer the following questions.

1. What are the emerging markets? 2. What were the main trends in their development over the last two decades? 3. Why are the emerging market equities attractive for investors? 4. What emerging economies have the potential for strong growth? 5. What are the prospects of the emerging markets volatility? 6. What long-term economic and political developments may be laying the foundation for sustainable performance from the emerging markets? 7. Why could free markets stimulate the development of the emerging economies? 8. What are the long-term fundamental positive factors in the emerging markets’ development?

Exercise 2*. Find terms in the text that match definitions given below and make sentences with each term.

1. a period of time during which stock market prices are rising

2. that part of the balance of payments recording current, i.e. non-capital, transactions

3. failure to make payments or repayments of interest or principal on the due date

4. security markets in newly industrialized countries with capital markets at an early stage of development

5. the process of opening and integrating markets across national borders

6. the private-sector lending arm of the World Bank

7. the policy of a government or central bank in monetary affairs, having regard to broad goals such as economic growth and restraint of inflation

8. a situation where problems in any one financial institution or market may spread, widely endangering the whole system

9. the primary financer of development projects in emerging-market nations that was created with the IMF at the Bretton Woods conference in 1944

Exercise 3*. Name all risks associated with doing business in Russia as an emerging country and describe what they entail.

Exercise 4*. Fill in the blanks using terms given below.

Dreaming with the BRICs

Over the next 50 years, Brazil, Russia, India and China – the BRICs – could become a much larger force in the world…… If things go right, in less than 40 years, the BRIC economies together could be larger than the G6 in……. By 2025 they could…….. over half the size of the G6. Currently, they are…….. less than 15%.

About two-thirds of the increase in US dollar……. from the BRICs should come from higher real growth, with the balance through currency…….. The BRICs’ real……… could appreciate by up to 300% over the next 50 years (an…… of 2.5% a year).

The……. in GDP relative to the G6 takes place steadily over the period, but is most dramatic in the first 30 years. Growth for the BRICs is likely to slow significantly toward the end of the period, with only India seeing…….. significantly above 3% by 2050. And…….. in the BRIC are still likely to be poorer on average than in the G6 economies, with the exception of Russia. China’s…….. income could be roughly what the developed economies are now (about US $30,000).