Swiss firm Vontobel, a notable investment and private banking player, is actively changing its strategy.
The firm is moving away from Chinese stocks, redirecting its investments towards more promising markets like Brazil, Mexico, and India.
As of December 2022, Vontobel Asset Management was overseeing CHF 108.1 billion ($120 billion) in assets. The firm boasts a rich history spanning over a century.
Strategist Ramiz Chelat has highlighted this shift. He points out the emerging markets’ appeal, driven by their companies’ increasing profits and expanding margins.
Specifically, Vontobel is focusing on Brazilian firms such as RaiaDrogasil and Totvs.
This redirection aligns with a global trend. Equity analysts are consistently lowering profit expectations for the Chinese market.
Factors like China’s slowing economy, deepening real estate crisis, and rising geopolitical tensions erode investor confidence.
Chelat elaborates, “We are reallocating funds previously invested in China to Brazil, Mexico, and India. These countries offer companies with rising valuations, in stark contrast to China’s downgrades.”
In its $2.2 billion emerging markets portfolio, Vontobel reduced its stake in China and Hong Kong from 36% to 19% over the past year.
This adjustment indicates a 7.45 percentage point underweight, a reversal from a 3.38 point overweight.
Vontobel’s bullish stance on Brazilian stocks is evident. The firm has doubled its investment in Brazil in the last year.
It is particularly optimistic about Raia Drogasil, expecting the pharmacy chain to double its market share to 30% in the next decade.
Chelat notes, “Raia Drogasil leads in logistics and offers a safe investment in Brazil’s aging demographic. It’s also expanding successfully into e-commerce.”
Shift matters as it reflects broader economic trends
The firm has also invested in Totvs, recognizing its superior customization for Brazilian businesses. This gives Totvs an advantage over its global rivals.
Chelat sees monetary easing as an opportunity to invest in banking stocks. His focus is on companies with strong market positions.
He finds these qualities in Brazil, Mexico, and India but is wary of China’s excessive capacity.
Vontobel’s strategy shift matters as it reflects broader economic trends. The firm’s move away from China to Brazil signals changing global investment patterns.
It shows a preference for markets with growing profit potential and stable political environments.
This decision impacts global financial markets, influencing other investors and shaping future economic landscapes.