Share

Pricey stocks push bearish investor to emerging-market debt

Edinburgh - Almost a decade after the start of the worst global financial crisis since the Great Depression, Aberdeen Asset Management’s Bruce Stout is as down on stocks as ever.

“Equity markets are so expensive, and some of the dividends attached to companies at the moment look extremely precarious,” Stout said in an interview at his Edinburgh office. He has cut the proportion of stocks in the £1.6bn Murray International Trust he manages to the lowest in about 10 years.

From his vantage point on the main shopping thoroughfare in the Scottish capital, Stout sees a disconnect between the optimism implied by equities trading at record highs and the weak outlook for growth in Western economies. That prompted him to invest in such things as emerging-market debt.

The Murray International Trust was founded early in the 20th century for wealthy Scots to invest in railroad bonds in the Americas and Stout, 58, has managed it since 2004. He has often been a skeptic, selling out of banks before the credit crunch when others were buying them and warning the world was borrowing too much.

The fund emerged as one of the best performers in the crisis years. It gained about 50% last year, beating most of its competitors, according to data compiled by Bloomberg.

Policy failure?

Stout remains cautious. He reduced the proportion of Murray’s portfolio in stocks to 82% by the end of March, according to the fund’s latest fact sheet. The rest comprises bonds and cash.

Efforts by central banks to boost economies through negative interest rates and asset purchases have been an “abject failure,” he said in the interview. Instead, they’ve resulted in higher consumer debt and lifted equity values to unrealistic levels, he said. His priority now is to preserve capital, rather than buying riskier, high-yield assets.

When Stout’s trust has bought stocks, it has focused on companies with individual strengths that can still thrive in a sluggish economic environment. Recent investments include stakes in Auckland Airport in New Zealand; German chemicals company Bayer, satellite operator Inmarsat; and Hong Kong rail company MTR.

The fund’s biggest holding is in Mexico’s airport operator, Grupo Aeroportuario del Sureste SAB. The company has benefited from a slump in the peso in the aftermath of Donald Trump’s presidential victory, which is boosting tourism. Its shares have climbed 20% since the election.

“If the consumer is heavily indebted, with genuinely grave concerns about employment prospects and declining real income, there’s just no firepower left,” said Stout.

Read Fin24's top stories trending on Twitter:

We live in a world where facts and fiction get blurred
Who we choose to trust can have a profound impact on our lives. Join thousands of devoted South Africans who look to News24 to bring them news they can trust every day. As we celebrate 25 years, become a News24 subscriber as we strive to keep you informed, inspired and empowered.
Join News24 today
heading
description
username
Show Comments ()
Rand - Dollar
19.00
-0.3%
Rand - Pound
24.09
+0.1%
Rand - Euro
20.61
-0.1%
Rand - Aus dollar
12.37
+0.4%
Rand - Yen
0.13
+0.5%
Platinum
904.45
+0.2%
Palladium
999.75
-0.6%
Gold
2,153.10
-0.3%
Silver
24.91
-0.5%
Brent Crude
86.89
+1.8%
Top 40
65,887
-0.6%
All Share
72,097
-0.5%
Resource 10
53,271
-0.1%
Industrial 25
99,407
-1.1%
Financial 15
16,625
+0.0%
All JSE data delayed by at least 15 minutes Iress logo
Company Snapshot
Editorial feedback and complaints

Contact the public editor with feedback for our journalists, complaints, queries or suggestions about articles on News24.

LEARN MORE
Government tenders

Find public sector tender opportunities in South Africa here.

Government tenders
This portal provides access to information on all tenders made by all public sector organisations in all spheres of government.
Browse tenders