NEW YORK May 5 Major investors on Monday said
they see opportunities in Brazil and Russia, two beaten-down
emerging markets, but remain cautious on China, underscoring
wariness around emerging markets once considered global
Even the optimism was replete with caveats at the Sohn
Investment Conference, where investors present some of their
best ideas in order to raise money to fight pediatric cancer.
Michael Novogratz, a principal at Fortress Investment Group,
said he sees upside for Brazilian assets -- as long as President
Dilma Rousseff loses her bid for re-election later this year.
Should Rousseff win, he said, Brazil "is in for a long dark
The race for Brazil's October presidential election has
tightened, according to a poll released on Saturday, which also
showed high disapproval for Rousseff and widespread
dissatisfaction with the stagnant economy.
Brazil jumped out of recession in 2009 and the economy shot
forward in 2010. Since then growth has stalled. The benchmark
Bovespa stock index fell more than 15 percent in 2013.
So far this year, the index is up about 4 percent.
"Brazil had this wonderful windfall," Novogratz said. "The
Brazilians squandered that surplus."
But with Rousseff's two main rivals - the more centrist
Senator Aecio Neves and former governor Eduardo Campos -
possibly more market friendly, "local markets would jump all
over" a change in policy.
In Russia, assets have tumbled recently as tensions in
Ukraine have fanned fears of war in the region. Russian stocks
are off around 14 percent year to date.
The decline has helped make Russian state-controlled gas
producer Gazprom more attractive, said James Grant, a
financial journalist, author and historian.
Gazprom shares have fallen about 9 percent this year, after
having dropped for the past three years.
"Its many imperfections would surely seem to be priced in,"
Grant said, citing what he said is an "A-OK" balance sheet.
Gazprom supplies about 30 percent of the gas consumed in
Europe, shipping about half of that via Ukraine.
"Good things do happen to cheap stocks," Grant added.
Though China has not experienced the same kind of tumble,
some think that is merely a matter of time.
Chris Shumway, the founder and managing partner of Shumway
Capital, was blunt: "Short the CNH," he said, referring to the
He said the issue in China is simple: excess credit growth
over nominal GDP, saying, "That's not sustainable."
The government will have limited options to deal with a
slowdown and the simplest might be to opt for a cheaper yuan,
The Chinese government is trying to restructure the economy
so it is driven more by consumption than the traditional engines
of exports and investment, but wants to avoid a sharp slowdown
that could fuel job losses and threaten social stability.
(Reporting by Sam Forgione, Rodrigo Campos, Svea Herbst-Bayliss
and Luciana Lopez; Editing by Leslie Adler)