“Ever since Brazil, Russia, India and China [BRICs] first featured in the wealth management lexicon,” says Matthew Vincent in the FT, “investment inflows have been fuelling their equity markets.” From November 2001 to 2007, Brazil gained 369%, India 499%, Russia 630%, and China, 817%. Those sorts of numbers usually mean a toppy market. But as Michael Konstantinov, manager of the Allianz RCM BRIC Stars Fund points out, there’s still plenty of value to be had.
Brazil is trading on a p/e of 9.9 against 16.1 for China, and is expected to outperform the latter this year. That’s one reason why the economics graduate has recently been underweight China, increasing positions in Brazilian stocks such as Vale, the world’s second-largest miner. But after a 40% fall since October, Chinese H-shares look attractive again, he tells Asian Investor.
The fund, which has returned almost 90% since launching in February 2006, can invest a third of its assets outside the BRICs. But Konstantinov still favours positions in infrastructure and logistical plays, especially “those related to domestic demand, which insulates the BRICs from much of the slowdown in the US,” he tells Investment Adviser.
Two of his biggest holdings are key Indian infrastructure plays: Bharat Heavy Electricals, an engineer that makes and services power plants; and Unitech, a Delhi-based property developer. “This is a volatile fund,” warns Darius McDermott in The Daily Telegraph. But he’s confident that Allianz’s “performance over recent years speaks for itself.”
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Allianz RCM BRIC Stars Fund top ten holdings
Name of holding, % of assets
China Shipping Development Co, 2.28
Evraz Group SA GDR each Repr 1/3 OR, 2.26
Usina Sid Minas Gerais Usiminas, 2.23
China Cosco Holdings Ltd, 2.20
Novolip-Gdr Regs, 2.18
Magnit Ojsc, 2.09
MMC Norilsk Nickel, 2.05
Novatek OAO, 2.04
OAO Rosneft-GDR, 2.01