Alibaba, Tencent and Other Emerging Market Stocks This Investing Pro Likes -- Barrons.com

In emerging markets, you want to see stability or an improving government scenario. Besides that, you want visibility that underlying institutions can function and there is some independence. We focus on the direction that countries are headed because there are so many fits and starts with policy.

On that front, Turkey might be going in a good direction; Brazil is OK, and Mexico is a question mark [after the wider mandate for the ruling Moreno party and the election of Claudia Sheinbaum as president]. In Mexico, we are reducing [exposure] a bit and taking a wait-and-see stance for the next couple of months. Mexico still benefits from [strong economic] conditions, but the market has done well and valuations aren't the cheapest.

Investors have dismissed Turkey for years. What is changing? Under [President Recep Tayyip] Erdogan, Turkey turned away from a secular state and took unorthodox moves on interest rates. Nepotism was widespread. You lose credibility with that. But Erdogan has realized he wants a better legacy and has brought in a strong economic team with Mehmet im ek as finance minister. It has been allowed to do what the economy needed, including raising interest rates substantially to stamp out inflation. When that change happened, we became more interested. We are still cautious, but things are going in a better direction.

One of the reasons that some investors are worried about China is lack of visibility. Do you share those concerns?

We have visibility: We know what the government says and is focused on -- common prosperity. They say it so many times. It's like the Federal Reserve. I know exactly what [Fed Chairman] Jerome Powell is saying. He says the same thing, but no one believes him. Take what you may from China's leader, Xi Jinping, but the direction [of the government] is clear.

Thanks, Alison.

Write to Reshma Kapadia at reshma.kapadia@barrons.com

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July 18, 2024 03:00 ET (07:00 GMT)

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