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Source: FE Analytics<\/p>\n
When asked which country he prefers over the long term, \u201cI would pick India with a 15-year timeframe,\u201d said Simmons. \u201cI think it is more likely to be a compounder despite the starting point.\u201d<\/p>\n
Indeed, one of the criticisms of the Indian market is that it is expensive, currently sitting on a cyclically-adjusted price-to-earnings (CAPE) ratio of 36.2x, more than double China\u2019s 18x.<\/p>\n
However, this did not concern Simmons as much, who said his fund (which is 21.2% invested in China and 13.4% in India) does not invest in pricier benchmark positions.<\/p>\n
\u201cI am not a big fan of the heavy index names right now on a shorter time horizon. We don\u2019t own anything in India that is in the MSCI [index],\u201d he said.<\/p>\n
He warned that the strong performance of the benchmark has \u201clargely been led by multiple re-rating rather than earnings growth\u201d, but said over the next 15 years there is \u201chuge potential\u201d for earnings to compound over time.<\/p>\n
He particularly likes the small- and mid-cap space, which is a \u201chuge\u201d market that \u201cdoesn\u2019t have as much coverage and as many minds pouring over it as China\u201d.<\/p>\n
While there has been a \u201cspurt\u201d of India-only funds launched in recent years on the back of the market\u2019s strong performance, it remains lowly researched and therefore has \u201cmore inefficiencies\u201d to exploit.<\/p>\n
Meanwhile, it is \u201cvery difficult\u201d to predict the Chinese market over the next 15 years, with uncertainty over the economic data produced by the country among many factors investors need to take note of.<\/p>\n
Others include the country\u2019s debt situation, the threat of deflation and geopolitical uncertainty, particularly with the US in the race to own the artificial intelligence (AI) space. One threat he does not see happening \u201canytime soon\u201d is China invading Taiwan, however.<\/p>\n
Like India, he said the market has risen due to share prices re-rating rather than earnings upgrades, although stocks remain on lower valuations in aggregate compared with Indian peers.<\/p>\n
As such, there could be some short-term appeal to the market, especially with \u201ctrillions of dollars\u201d in excess savings sitting in household accounts that are unlikely to be put to work in property anymore \u2013 the \u201ctraditional destination\u201d for those savings, he said, alluding to the Chinese property scandal of 2023<\/a>.<\/p>\n \u201cAt the same time, rates in the Chinese fixed income market have been falling, so that doesn\u2019t offer much of a return anymore either,\u201d said Simmons.<\/p>\n With government initiatives to push the stock market \u201cto the fore\u201d, money sitting on the sidelines is now being moved into the equity market.<\/p>\n Simmons runs the top-performing Fiera Emerging Markets fund alongside deputy managers Stefan Bottcher and FE fundinfo Alpha Manager Dominic Bokor-Ingram.<\/p>\n It has been a top quartile performer in the IA Global Emerging Markets sector over one, three, five and 10 years, as well as since Simmons took charge in 2017.<\/p>\n
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