Polar Capital Holdings plc (Polar Capital), the specialist active asset management group, has released a selection of its funds’ outlooks for 2022:
- Polar Capital Emerging Markets and Asia Team
- Polar Capital European ex-UK Income Team
- Polar Capital Global Financials Team
- Polar Capital Global Insurance Team
- Polar Capital UK Value Opportunities Team
Polar Capital Emerging Markets and Asia Team
“Emerging markets – growth and quality investing in particular – had a tough 2021 but we believe we are close to an inflection point that will be more favourable for our investment style.
One of the two main headwinds in 2021 was the Federal Reserve’s tapering policy on the back of the inflation scare in the US. We think we will see inflationary pressure ease and, if the market reaction to tapering in 2013 and 2018 is anything to go by, we expect this to be positive for emerging markets.
We also believe there is a great deal of ‘taper fear’ priced into emerging markets so there is likely to be a supportive tailwind in the early part of 2022. As we move through the first half of the year, we expect the easing of inflationary pressure to be significant, particularly on the supply side, so we look forward to this headwind becoming a tailwind.
A second headwind last year was China, particularly its internet regulation and property sector. We believe we are over the main internet regulatory hurdles that have, for the main part, been a positive for incumbent high-quality companies and healthy for the market.
China’s property sector woes were headlined by Evergrande, though again we feel the pressures are easing with politicians and senior leadership far more supportive towards the market and pro-growth. We think this is a turning point for China, especially looking at its valuation levels right now that suggest the risk/reward towards Chinese equities is favourable.
Looking ahead, we are excited about a number of areas. As well as China, we see opportunities in technology and, within technology, semiconductors where we see growth potential from high quality companies with attractive valuations.
We also see automation and industrial upgrades as a strong area – companies that can help factory automation, for example. The digitalisation of industry is a very exciting area for us and given the market pressures we saw at the end of 2021 we think now is a good entry point to quality companies with the potential for multi-year growth.
Another area we have exposure to in the portfolio and feel favourable towards in 2022 is India as we believe we are at the early stages of a strong investment capex cycle. We believe India offers improved manufacturing, strong consumers with spending power and job creation.”
