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A-rated manager reveals his top EM country

A-rated manager reveals his top EM country

While developing world investors are looking towards China's growth for opportunities, Pim van Vliet said Taiwan could offer better prospects with less risk.

The Citywire A-rated manager, who runs the Robeco Emerging Conservative Equities fund with Jan Sytze Mosselaar, Arlette van Ditshuizen, and Maarten Polfliet said Taiwan is full of stable companies.

'What we find in Taiwan is that many stock which comply with our criteria - they are low risk, they pay a handsome dividend, either they buy back shares, have good momentum and valuation. That leads us to a Taiwan overweight,' he told Citywire Selector.

'We have IT companies in Taiwan, as it is low risk for emerging markets, but also scores pretty well on the valuation measure. We have an overweight in IT, the fact that low risk is appealing there, as we tend to favour these types of companies.'

Taiwan is the largest country allocation in the fund at 20.6%, which is overweight against the benchmark by 8.4 percentage points.

China is the second largest at 18.3% but it is an underweight by 8.2 percetage points. Van Vliet said while some Chinese companies pay out high dividends there are drawbacks.

'They are quite highly leveraged, more so than in other countries. Generally speaking, this is for all Chinese stocks, because we do have some very attractive ones. But in general they are very volatile, they are very cyclical so the beta is also above average and there is some leverage there.'

Boring sectors

On a sector basis, van Vliet favours telecoms and utilities, where he holds 12.1% and 10.7%, respectively. These are the third and fourth largest sector holdings in the fund after financials and IT.

Van Vliet said stocks in utilities and telecoms had high alpha in the long run, but did not want to allocate too much of the fund to defensive sectors.

'Many utilities and telecoms stocks pay out handsome dividends, with low price fluctuations, good diversification opportunities and good momentum and they are selected for the fund,' he said.

'That is the boring part of the market, utilities will not easily double. Research by analysts shows they are like corporate bonds. That is the anomaly in the boring part of the market, the stocks get less attention, less news, less price fluctuation. That is usually a topic of the market.'

Over three years to the end of January 2017 the Robeco Emerging Conservative Equities fund returned 2.04% in US dollar terms. This compares to a rise of 5.54% by its Citywire-assigned benchmark, MSCI EM (Emerging Markets) TR, over the same time frame.

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