Jorry Noddekaer: Rallies, rates and risk in Emerging Markets

Nordea’s Jorry Rask Nøddekær is optimistic about Emerging Markets in 2017.

Key points:

  • EM economies should perform well and deliver growth opportunities.
  • US rates should increase gradually without disrupting EMs.
  • Trumponomics could threaten exporting countries; investors are better off focusing on EMs with pricing power and competitive advantage.

Nordea’s Jorry Nøddekær, manager of the Nordea’s Emerging Stars Equity strategy, is optimistic about Emerging Markets in 2017. Despite the fact that Trumponomics in its present form could pose a threat to exporting countries, he expects these economies to perform well and deliver growth opportunities. He recently sat down with Nordea Asset Management to talk about his outlook on Emerging Markets.

NAM: Emerging Markets equities started 2017 strong. Can this rally continue?

JN: In 2016, we saw some really good fundamental recovery in Emerging Markets — there’s been some good progress which has definitely continued in 2017. We remain quite constructive for Emerging Markets for the rest of the year in light of continuous earnings momentum and generally positive economic performance. We may see a bit more volatility around the summer period as strongly cyclical factors kick in, but overall we are confident and see quite good growth opportunities.

NAM: Can China successfully move from export- and investment-led growth to consumption-driven growth?

 JN: China functions between an “old economy” and a “new economy”, and we have been really supportive of the investment scene around China’s new economy. We definitely think that it’s very sustainable and has a significant way to go. We see this in how the index is changing — the new economy is significantly more reflected in China. I think, on that parameter alone, we are definitely seeing a transition taking place there at the equity market level.

NAM: How do you see US interest rates evolving and how could this impact flows into Emerging Markets?

JN: There is a high likelihood that we will continue to see US rates moving up, though we do think it will be quite gradual. The likelihood of an aggressive overshoot or something like that is actually quite minimal, as we do see  a high probability of the US economy rolling over or at least not continuing to grow strongly. This environment could be quite supportive for the development and economic trends in Emerging Markets, which don’t respond well to spikes or peaks.

NAM: Do you consider Trumponomics to be a risk for Emerging Markets? How does your portfolio deal with this?

 JN: Trumponomics is certainly a risk element for Emerging Markets, and we need to be aware of this. We make sure that we are aware of what kind of exposure we have to exporting countries and companies. When we do invest in something in these areas, we want to make sure that these companies produce products that have a strong competitive advantage and that they have pricing power so in the case of any form of tax, they’ll be able to pass it on.

NAM: Where do you currently see the biggest opportunities in Emerging Markets?

JN: We still see a tremendous number of opportunities in Emerging Markets. We are optimistic not only on the short term, but in particular on the long term. A lot of these opportunities exist in domestic development, like urban consumers in India, healthcare reforms in China and export companies that are uniquely positioned in the technology space. We think technology in Emerging Markets offers tremendous opportunities.

About Nordea Asset Management

Nordea Asset Management (NAM, AuM 217 bn EUR*), is part of the Nordea Group, the largest financial services group in Northern Europe (AuM 323 bn EUR*). NAM offers European and global investors’ exposure to a broad set of investment funds. We serve a wide range of clients and distributors which include banks, asset managers, independent financial advisors and insurance companies.

Nordea Asset Management has a presence in Cologne, Copenhagen, Frankfurt, Helsinki, London, Luxembourg, Madrid, Milan, New York, Oslo, Paris, Sao Paulo, Singapore, Stockholm, Vienna and Zurich. Nordea’s local presence goes hand in hand with the objective of being accessible and offering the best service to clients.

Nordea’s success is based on a sustainable and unique multi-boutique approach that combines the expertise of specialised internal boutiques with exclusive external competences allowing us to deliver alpha in a stable way for the benefit of our clients.  NAM solutions cover all asset classes from fixed income and equity to multi asset solutions, and manage local and European as well as US, global and emerging market products.

 *Source: Nordea, 31.12.2016

Nordea Asset Management is the functional name of the asset management business conducted by the legal entities Nordea Investment Funds S.A., Nordea Funds Ltd and Nordea Investment Management AB (“the Legal Entities”) and their branches, subsidiaries and affiliated companies. This document is intended to provide the reader with information on Nordea’s specific capabilities. This document (or any views or opinions expressed in this document) does not amount to an investment advice nor does it constitute a recommendation to invest in any financial product, investment structure or instrument, to enter into or unwind any transaction or to participate in any particular trading strategy. This document is not an offer to buy or sell, or a solicitation of an offer to buy or sell any security or instruments or to participate to any such trading strategy. Any such offering may be made only by an Offering Memorandum, or any similar contractual arrangement. Consequently, the information contained herein will be superseded in its entirety by such Offering Memorandum or contractual arrangement in its final form. Any investment decision should therefore only be based on the final legal documentation, without limitation and if applicable, Offering Memorandum, contractual arrangement, any relevant prospectus and the latest key investor information document (where applicable) relating to the investment. The appropriateness of an investment or strategy will depend on an investor’s full circumstances and objectives. Nordea Investment Management recommends that investors independently evaluate particular investments and strategies as well as encourages investors to seek the advice of independent financial advisors when deemed relevant by the investor. Any products, securities, instruments or strategies discussed in this document may not be suitable for all investors. This document contains information which has been taken from a number of sources. While the information herein is considered to be correct, no representation or warranty can be given on the ultimate accuracy or completeness of such information and investors may use further sources to form a well-informed investment decision. Prospective investors or counterparties should discuss with their professional tax, legal, accounting and other adviser(s) with regards to the potential effect of any investment that they may enter into, including the possible risks and benefits of such investment. Prospective investors or counterparties should also fully understand the potential investment and ascertain that they have made an independent assessment of the appropriateness of such potential investment, based solely on their own intentions and ambitions.Investments in derivative and foreign exchange related transactions may be subject to significant fluctuations which may affect the value of an investment. Investments in Emerging Markets involve a higher element of risk. The value of the investment can greatly fluctuate and cannot be ensured. Published and created by the Legal Entities adherent to Nordea Asset Management. The Legal Entities are duly licensed and supervised by the Financial Supervisory Authority in Sweden, Finland and Luxembourg respectively. The Legal Entities’ branches, subsidiaries and affiliated companies are duly licensed as well as regulated by their local financial supervisory authority in their respective country of domiciliation. Source (unless otherwise stated): Nordea Investment Fund S.A. Unless otherwise stated, all views expressed are those of the Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches, subsidiaries and affiliated companies. This document may not be reproduced or circulated without prior permission. Reference to companies or other investments mentioned within this document should not be construed as a recommendation to the investor to buy or sell the same, but is included for the purpose of illustration. The level of tax benefits and liabilities will depend on individual circumstances and may be subject to change in the future. © The Legal Entities adherent to Nordea Asset Management and any of the Legal Entities’ branches, subsidiaries and/or affiliated companies.