It took nearly a decade for one of Europe’s biggest emerging-market investors to return to Argentine stocks.
Wim-Hein Pals, head of emerging markets at Robeco Institutional Asset Management, hadn’t touched them since selling his last holding nine years ago. This time, he didn’t wait for MSCI Inc to add the South American country back to a closely-followed benchmark index before buying in again. He started amassing a position in the first quarter of this year and has added to it ever since.
Pals, who oversees US$18 billion, found his catalyst in Argentina’s energy boom. Fuelled by the Vaca Muerta shale formation, rising exports helped the nation reach a record energy trade surplus in the first half of the year.
“Argentina has a huge net export of energy and, to a certain extent, is the beneficiary of high oil prices,” said Pals. That “helps the trade surplus, helps the currency. It’s sort of a catalyst for the whole country.”
Pals, who joined the Rotterdam-based firm in 1990, also pointed to President Javier Milei’s economic reforms, which have been touted by ratings firms in recent credit upgrades. He has exposure to shares of Argentine energy and financial companies listed in the US.
The position in Argentina, to be sure, isn’t “huge,” and Pals acknowledges the political risk of Wall Street darling Milei being up for re-election next year. But he sees fundamentals improving and decided to move ahead of the passive investor crowd.
Argentina isn’t his sole off-benchmark holding. Pals added Vietnam as he expects the country to attain emerging-market status by the end of 2027, unlocking passive inflows. He says Argentina may follow in 2028 or 2029.
Cutting Taiwan
Elsewhere, Pals has taken profits in Taiwan’s chipmaker-heavy market after the strong run – up in technology shares. He is now “maximum underweight” the Asian market, with an allocation 500 basis points below its benchmark weight – a limit he uses as a rule of thumb.
“Some of them tripled, quadrupled,” Pals said referring to stock prices. “We took money off table.”
Enthusiasm for companies tied to the artificial intelligence supply chain has propelled Asian technology stocks. It has reached the point where just three companies — Taiwan Semiconductor Manufacturing Co, Samsung Electronics Coand SK Hynix Inc — account for more than 30 percent of the MSCI Emerging Markets Index.
While the outlook remains bright for many of these companies, Pals is mindful of concentration risks.
That’s led him to be underweight Asia, an atypical move in his fund’s 32-year history. The Robeco Emerging Markets Equities Fund has outperformed 84 percent of its peers over the past five years, according to Morningstar Inc data. This year, it has beaten 60 percent of them.
Poland, Hungary and Greece are among his favorite markets in Europe. His largest regional overweight, meanwhile, is Latin America, where he favours countries from Mexico to Peru.
“We don’t see EM as a leveraged play on AI,” Pals said. “It’s much more than that.”
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by Vinícius Andrade, Bloomberg
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