The worst economic worries regarding COVID-19 have faded into the background globally, says Fidelity's John Dance, and investors are starting to turn their attention back to long-term opportunities regarding shifting global demographics and the opportunities they present in emerging markets (EM).
"EM is increasingly the global growth engine," says Dance, portfolio manager of Fidelity® Emerging Markets Fund (FEMKX). "I'm seeking to own companies in the fund that take advantage of higher living standards and an expanding middle class."
The stocks he likes the most for the fund, Dance says, offer exposure to countries he thinks are maturing economically but are less obvious COVID recovery plays than the restaurants, gyms, cruise lines, and casinos that have already gained on speculation.
For this reason, as of August 31, the fund owned Mexico-based Grupo Aeroportuario del Centro Norte, which operates 13 international airports in Monterrey, Acapulco, and other cities. Dance thinks the company could benefit from both a short- and longer-term increase in leisure and business travel, as well as increased passenger traffic from international airlines that are routing more of their flights through Mexico due to a trade conflict between the U.S. and China.
Dance also has kept a close eye on India following a surge of COVID-related deaths this spring, although he noted the situation has improved considerably amid a continued ramp in the country's vaccine supply.
Based on Dance's view of the risks, the fund retained a sizable stake in India-based Reliance Industries. Dance believes Reliance, primarily known as an energy company, could see a rebound in demand for jet fuel if the COVID-19 infection rate improves further and travel in India begins to increase, spurred by domestic and international travel. He also sees long-term potential driven by India's diversified industrial and consumer economies.
"These are just a couple examples of the type of value-oriented recovery plays I've found and continue to seek for the fund," Dance says.
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