Recentyears havebeenwetand windyfor emerging market investors. The last year has been particularly stormy, with the global emerging markets sector downa brutal 17.87%, according to figures from MSCI, and thats despite brighter weather in the last three months, when theindexrecovered13.66%.
UK-listed companies with major exposure to emerging markets have been blown about onthese storms, but some have withstood the turbulence better than others.
BHP Billiton
The mining sector is helplessly exposed to emerging market turmoil, particularly in metals-hungry China. The worlds biggest miner,BHP Billiton (LSE: BLT), is still trading40% lower than a year ago,despite rising21% in the last three months. Worryingly, Chinacontinues toslow. First-quarter GDP growth of1.1% marked a sharp dropfrom1.5% in the previous quarter, and is the weakestfigure since data collection began in 2010.
Chinas growth spurthad to tail offat some point and its demand for iron ore, copper, coal, nickel and zinc may ease furtheras it matures into a consumption-driven economy. BHP Billiton has been hit both by slowing emerging market growth, and the changing nature of thatgrowth. However, its also an oil producer andwill benefit from $50 crude, as well as the weaker dollar. I wouldntbe surprised to see oildrive higher to $60, which would be a further boost, although a shale revival could prevent it climbing beyondthat.
Commodity price movementswill continue to ragebut cost-cutting and sheer economies of scale should secure BHP Billiton. The forecast yield is a realistic2.9%, the valuation is still keen at 10.1 times earnings. It all depends on where you think China goes next.
Standard Chartered
Asia-focused bank Standard Chartered (LSE: STAN) has been subject to even wilder swings lately, its share price being down 46% in the last year, whilerebounding 36% in three months. Now THATwas a buying opportunity for brave investors willing to forgive the bank for past misdemeanours.New boss Bill Winters has a clean slate and a clear mission, andwill be working hardto booststandards. But he has a major task ahead of him.
Standard Chartered was probably oversold but my worry now is that it has been overbought. Recent weeks have been fun, with cost savingsand falling impairments boosting sentiment, but this is only the start of a long and bumpy road. Broker Jefferies has pointed out that China and Hong Kong will continue to slow and this will hit the banksrevenue expectations, which it cut by 9.5% for 2016/18, while lowering earnings per share guidance by 48%.
Unilever
Amid all this volatility, global household goods giant Unilever (LSE: ULVR) stands out as a bastion of stability, as it so oftendoes. Its up 8.52% over the last year (a terrific show given the double-digityear-on-year plunges everywhere else) with recent growth slow but steady. Unilevertrades at 20.9 times earnings but it has often been more expensive than that, while its3.8% yield is relatively generous by its standards. This stock remainsa great anchor for your portfolio,whatever emerging market storms throw at us next.
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Harvey Jones has no position in any shares mentioned. The Motley Fool UK owns shares of and has recommended Unilever. We Fools don’t all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.
