US an emerging market to watch, says Imara Asset Management

China’s where all the investment action is, right? Well, not entirely and at least one asset manager responsible for building wealth for South African salary earners leans increasingly toward another ‘emerging market’ … the USA.

Chris Botha, senior fund manager at Illovo-based Imara Asset Management South Africa, believes over the next 25 years this ‘developed market’ has the potential to emerge as a much more vibrant economy on the back of massive oil and gas discoveries and product innovation by big US corporates.

He comments: “Some developments that will play out over the next two decades are heavily in favour of the USA. For instance, its so-called Rust Belt, once the home of aging heavy industry, is being revitalised thanks to new energy sources.

“Some gas-fired US factories will enjoy the benefit of low-cost energy for years to come.

“China may have to settle for being the No. 2 economic super-power for much longer than once thought.”

The discovery and exploitation of substantial shale and gas deposits is not the only factor that could drive down US energy costs. US investment in renewables has been rising and may well pay off.

Botha adds: “The impact of US energy self-sufficiency will be considerable. Petro-dollars will stay home in the USA, contributing to a stronger dollar.”

He thinks a new wave of technology innovation by major US companies will also contribute to a resurgence.

"Chinese growth will continue,” he believes, “but challenges can be expected as it tries to manage the transition to a consumer economy. The long-term implications of China’s one-baby policy will also have to be addressed.

“China’s population will age and growth will probably slow. The precedent for developments like these was set in the 80s and 90s in Japan.”

The activities of multinationals, many US-based, also makes this long-developed economy one to watch.

Big international brands draw an increasing proportion of their earnings from emerging markets with young, growing populations. Positions in these companies gives investors simultaneous exposure to both the developed and developing world.

American consumer goods companies like Unilever are well placed to take advantage of growing appetite for consumer brands in countries where young people are highly apparitional and the middle class is expanding.

Positions in US technology companies, big brands and others poised to exploit the great North American come-back are a feature of long-term portfolio planning at Imara AM, says Botha.

“Tapping into the future today is part of our philosophy of long-term value enhancement,” he says. “Our results confirm long-term themes like this have a key role in portfolio construction in support of clients with a long investment horizon.”