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GIC sees investment opportunities in emerging markets

SINGAPORE – GIC said on Wednesday it sees significant investment opportunities in emerging markets where stock prices appear low by historical standards.

SINGAPORE – GIC said on Wednesday it sees significant investment opportunities in emerging markets where stock prices appear low by historical standards.

The comment came from its group chief investment officer, Mr Lim Chow Kiat, at the Investment Management Association of Singapore 15th Annual Conference on Wednesday.

Upcoming elections and political volatility paint a picture of uncertainty for developing markets in the short term.

But GIC said significant opportunities exist in some of these markets on a bottom-up basis, especially as stock prices appear to be undervalued.

Mr Lim said: “In developing countries, especially the bigger ones, there are still many of these supply side trends going on -- you see industry consolidation, you see the penetration rate for certain products continuing to be increasing.

“So, many companies in these developing countries continue to benefit from these types of trends despite macro concerns, policy and political uncertainty.”

When it comes to investing, Mr Lim said GIC has five principles which it expects its staff to follow, the most important of which is to buy assets where there is a gap between price and intrinsic value, with a margin of safety.

Mr Lim elaborated: “The biggest risk in investing is really in buying an asset at an overvalued price. Intrinsic value -- there’s always a range of uncertainty around it because it involves projecting cash flows ahead -- it involves making assumptions about the environment, and in the case of equity investments, about the business.

“Effort in getting down to some sort of estimate, or a range of estimates, is a very key part of that process. Then it comes to... price discipline -- that you take the view that the market would provide you with entry or exit opportunities, that you do not act until you have those types of gaps existing in the markets.”

The four other principles include practising long-term investment, leveraging on strengths, controlling risks and preparing for the future.

In light of this, Mr Lim said, GIC has identified certain risks of investing in developed markets.

He said: “There are pockets of high valuation, expensive, especially in credit. We see that in the credit side -- spreads are tight, volumes are big and positions are heavy.

“Even if you look beyond credit in the equity side, there are some sectors which are raising questions -- a lot of them have experienced big multiple expansions -- whether those are really sustainable.” Channel NewsAsia

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