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APQ Global's emerging markets focus paying healthy dividends

The bulk of overall exposure is in credit and government bonds followed closely by equities
Russia picture
Russia is one of APQ's favoured areas

Emerging markets-focused APQ Global Limited’s (LON:APQ) objective is very simple – pay a fully covered dividend yielding 6% while ensuring the book value grows by between 5%-10% each year.

The company invests globally – so that means Asia, Latin America, the former Soviet Union and Eastern Europe - and invests in equities, currencies, credit instruments and government bonds.

WATCH: APQ Global sees new partner network as attractive additional growth opportunity

Occasionally it will take strategic stakes in businesses where it becomes a supportive shareholder for a journey of three to five years.

Regionally, it is diversified. “That’s important in emerging markets,” says Bart Turtelboom, the fund’s veteran chief executive.

Its biggest exposures are Brazil, Russia and its experts like the financial services and natural resources sectors.

Financial liquidity

Turtelboom adds these are exceptional times for politics, economies and markets, but abundant financial liquidity is supporting the markets.

Among his investment themes are deregulation with healthcare sector set to gain. 

“The pace of innovation is snowballing and there is a drive to access a global market, including India, China and many other countries.

“There are many opportunities, not just for diagnostics and cures but also intervention.”

Technology is another important driver, says Turtelboom.

“Leaders in the technology industry say there is no such thing - just start-ups and disrupters that leap-frog established businesses.

Promising outlook for 2018

APQ increased book value by 4.6% to US$100mln or 128.11c per share over 2017.

With a dividend of 5p, total returns were 9.9%.

“The outlook for emerging market [EM] currencies and local markets has generally continued to brighten over the course of 2017 and growth figures for the year should come in around 4.5%,” said Wayne Bulpitt, APQ’s chairman.

“Next year's growth forecast is just shy of 5%. 

“This should also lead to a small widening of the positive difference of emerging market versus developed market growth, which should also add support to EM currencies.” 

Against that there will be elections in several key emerging markets - Mexico and Brazil being the major ones, he said, while there is the risk that the US Federal Reserve will tighten monetary policy faster than expected.

Even so, the policies enacted by central banks in Japan and Europe are still very accommodating, said Bulpitt.

Positive EM credit and debt markets 

“Given the positive growth outlook for emerging markets (expected to grow around 5%), we believe keeping our allocation to EM credit in place will deliver positive returns,”

“The outlook for 2018 for emerging market equities looks very strong, with multiple levers of growth all pointing in the same direction.

“For the first time since the global financial crisis we are experiencing synchronised growth across all the major developed and emerging economies and we believe this will continue in 2018.“

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