Vontobel Asset Management

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Vontobel Asset Management Investment Funds
Emerging Markets Good Buy or Goodbye? Referent
Rajiv Jain, Portfolio Manager International Managi
ng Director, Vontobel Asset Management, Inc., New
York
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Emerging Markets So far on passing lane
Source HANDELSBLATT, 11/11/2005, p. 39
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Solid macro data as safeguard against volatility?
Excerpted from The Continuing Case for Emerging
Markets, Revisited Everest Capital, February
2005
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Leading productivity
Emerging Markets offer some of the most
productive corporations on the basis of RoE
Source Bernstein Research and Everest Capital,
February 2005
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AsiaMore and more independent of global economy
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Low CorrelationGood Diversification
Source Bloomberg, Monthly Data for MSCI and IFC
Indices, Gross Total Returns in USD 12/31/98 -
12/31/2004
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ChinaReal GDP Growth vs. Total Return of the
Market
The real GDP growth compounded 9 in China
relative to a stock market return of -2!!
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) from
FactSet Aggregates.
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IndiaReal GDP Growth vs. Total Return of the
Market
The real GDP growth compounded 6 relative to a
USD return of 8.
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) from
FactSet Aggregates.
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South KoreaReal GDP Growth vs. Total Return of
the Market
The real GDP growth compounded 7 relative to a
USD return of 3.
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) from
FactSet Aggregates.
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ChinaValuations and Earnings growth matter
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) and
valuation from FactSet Aggregates.
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IndiaValuations and Earnings growth matter
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) and
valuation from FactSet Aggregates.
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South KoreaValuations and Earnings growth matter
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) and
valuation from FactSet Aggregates.
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Market ValuationsDividend Yields Over Last 20
Years
5.00
Asia/Pacific ex Japan
Japan
World
4.50
4.00
3.50
3.00
2.50
2.00
1.50
1.00
0.50
0.00
Nov-85
Nov-86
Nov-87
Nov-88
Nov-89
Nov-90
Nov-91
Nov-92
Nov-93
Nov-94
Nov-95
Nov-96
Nov-97
Nov-98
Nov-99
Nov-00
Nov-01
Nov-02
Nov-03
Nov-04
Source FactSet Aggregates
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Selected stocksExamples
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Unilever IndonesiaEPS Growth Positively
Correlates with Price Performance
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) and
valuation from FactSet Aggregates.
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Lotte ConfectionaryEPS Growth Positively
Correlates with Price Performance
Sources Real GDP Growth from IMF Directions of
Trade, years before 1999 and World Bank Data,
years 2000-2004. Total Return Index (USD) and
valuation from FactSet Aggregates.
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Hero Honda MotorsEPS Growth Positively
Correlates with Price Performance
Source FactSet as of Nov. 30, 2005.
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Grupo ModeloMexico

• Founded in 1925, Grupo Modelo is the leader in
  the production, distribution, and sale of beer in
  Mexico (over 60 market share).
• Brands Corona, Negra Modelo, Pacifico and more.
• Exclusive Mexican importer and distributor of
  Anheuser-Busch beers (Budweiser, Bud Light).
• Anheuser-Busch owns about 50 of Grupo Modelo.
• Sales growth of 8 annually over last 10 years.
• Operating margin gt20, ROE gt10 No long term
  debt.
• Dividend yield of 3.
• Forward P/E of 16x.
• Market Cap US 10.5 bn.

As of 9/26/05
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Grupo Modelo
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Growth vs. ValueOur Definition
Classical Growth High Prices, High Earning
Growth
"Stars" High Earnings Growth, Low Prices
"Looser" High Prices, Low Earnings Growth
Classical Value Low Prices, Low Earnings Growth
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Attractive Growth and Undervaluation
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Investment Process
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Vontobel Fund - Emerging Markets
EquityPerformance as of 12/31/2005
Rating as of 12/31/2005
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Emerging Markets EquityUp/Down Market Analysis,
ending December 2005
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Equity Funds Emerging Markets global Return-Risk-S
pread sheet last 3 years
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Vontobel Fund - Far East EquityPerformance as of
12/30/2005
Rating as of 12/31/2005
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Far East EquityUp/Down Market Analysis, ending
December 2005
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Equity Funds Far East ex Japan Return-Risk-Spread
sheet last 3 years
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OutlookDont expect to see a break in flows
until bad things happen
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Sector Winners Energy, Materials and
TechnologyTrend going on?
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ROE of Energy and Materials stocksPeaking?
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Conclusions

• Positive
• Still attractive valuations absolutely,
  historically and relatively
• High productivity
• Solid macro data
• Asia More and more independent of US economy
• Low Correlation - Good Diversification
• Negative
• Negative growth surprise
• Exogenous shock (bird flu, terrorism)
• Optimism relative to Emerging Markets is probably
  peaking
• Earnings and productivity at record levels
• High oil price and rising interest rates
• ? EM are an essential element of a Global Equity
  Portfolio
• ? Outperformance by Buying Quality in Emerging
  Markets!

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Thank you for your attention!