Morningstar Advisor - December 2013/January 2014 - (Page 38)

Spotlight World's 10 Fastest Growing Economies (GDP %) Country 2001-2011 Angola 10.9% China 10.4% Myanmar 9.9% Nigeria 8.8% Chad 8.4% Ehtiopia 8.3% Kazakhstan 8.2% Mozambique 8% Cambodia 8% Rwanda 7.9% Country 2012-2017E China 8.5% Mozambique 7.8% Ghana 7.7% Zambia 7.6% Congo 7.2% Cambodia 7.2% Tanzania 6.9% Nigeria 6.7% Ethiopia 6.6% Other funds such as Seafarer Overseas Growth & Income SFGIX have also felt the pullback. Manager Andrew Foster initially stayed out of the country due to valuation and currency concerns when he first launched the fund in early 2012. But over the summer he started slowly buying when stock prices fell. While he owns Vale, Foster has leaned towards more consumer-oriented holdings. Odontoprev ODPVY is a provider of dental services and insurance. The fund also owns Aliansce Shopping Centers. (See Undiscovered Manager on Page 58 for more on Seafarer.) risk. "You could see pension money there if [the markets] develop liquidity," she says. Changing Face of Africa "We have a continent that is largely at peace," says Oliver Bell, the lead manager of T. Rowe Price Africa & Middle East TRAMX, pointing to a map of Africa that shows just three hot spots on the continent versus one next to it that shows 20 in the same region in the 1970s. Given his fund's mandate, Bell has reasons to be a believer in the potential of the region. But he is also armed with some powerful statistics. Eight of the 10 estimated fastestgrowing economies in the world over the next five years are located on the continent. Aggregate debt to GDP has fallen to 20% from 60% in 2000. Africa has one of the largest populations of young people, which is rapidly expanding the workforce. That population is also becoming more educated. 7.6% Rwanda which had 57% of its assets in that country as of Oct. 31, 2013. Top-five holding Petrobras PBR, the big state-controlled oil company, has dropped 10% this year. In addition, miner Vale VALE has seen iron ore shipments to China slip. Both stocks are partly behind the fund's 10.9%% loss through Oct. 31, which lands it in the bottom quartile of the Latin America stock category. Source: T. Rowe Price $1 billion-plus companies that will be global players, second only to China and India. But Brazil is now partly a victim of its own success. The slowdown in China's economy has rippled through Brazil's as well since the two are major trade partners. The government has struggled to rein in inflation, which hovers around 6%. GDP growth should come in around 2.4% this year. National elections next year also raise concerns about the future. The pullback in Brazil has stung funds such as T. Rowe Price Latin America PRLAX, 38 Morningstar Advisor December/January 2014 Brazil, though, isn't the only option in Latin America. Chile, Peru, and Colombia make up what BCG calls the "Andean Three." These three emerging markets are predicted to grow at a combined faster rate than Brazil and Mexico, respectively, and like Brazil, these three countries have seen the poorer parts of their populations rise into middle class status the last decade. They also have mutual trade agreements between them. While mining and financial stocks typically make up the exposure from these countries in emerging-markets funds, the T. Rowe Price offering does own Chile-based department store chain Falabella, and Wasatch's Geritz recently scooped up Forus, a clothing retailer also based in Chile. These countries hold promise, but not every manager is sold. Deborah Velez Medenica, the lead manager of Alger Emerging Markets AAEMX owns in her fund Peruvian bank Credicorp BAP. She stresses, though, that until liquidity improves she is hesitant to take on additional country One of Bell's top picks is MTN Group MTNOF, a large mobile phone operator in Africa. While his thesis is based on soaring mobile phone usage, he also points to the changing face of banking on the continent as a reason to own the stock. MTN has a service that acts as a mobile wallet, allowing users to transfer money via entities such as Western Union WU. Bell thinks such services will reshape the banking system as consumers avoid branches altogether. Like MTN, most of Bell's holdings are located in South Africa, but give the fund broad exposure to the continent. Geritz is playing the consumer angle from a different perspective. She owns Nigeria-based subsidiaries of Nestle, Cadbury, and Unilever in addition to several breweries such as East African Breweries, Nigerian Breweries, and Guinness Nigeria. Both managers admit there are several key concerns that come with investing in

Table of Contents for the Digital Edition of Morningstar Advisor - December 2013/January 2014

Morningstar Advisor - December 2013/January 2014
Contents
Contributors
Letter From the Editor
What’s Your Purpose?
Working for Gen Y
How to Allocate College Savings
Mobius Looks to a New Frontier
Investments á la Carte
Investment Briefs
How to Manage Bonds for Today and Tomorrow
Cloud Is the New Engine of Growth
Knowing Where to Look
Economic Vulnerability Varies by Country
Factor Investing in Emerging Markets
Following the Rules
Exploring Indexing’s Next Frontiers
Frequent Fliers
Family Blind Spots
Optimal Portfolios for the Long Run
Finding Value in a Pricey Sector
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Emerging-Markets Roller Coaster

Morningstar Advisor - December 2013/January 2014