Bullish on emerging markets like Japan
Interview: Driehaus Capital Management---Ritter, Eric---Portfolio Manager
axel weber is the proposed new bundesbank president. his nomination came as a surprise and he is not a member of any political party and is expected to continue the tradition of price stability. weber is a member of german chancellor knew hard schroeder’s panel of economic advisers, often referred to as the five wise men. if the choice is backed by the cabinet tomorrow, weber will represent germany on the 18-member governing council of the european central bank. weber will succeed ernst welteke who resigned over hospitality payments he accepted from dresdner bank. our next guest manages $700 million in global stocks, is bullish on japan and likes emerging markets . eric ritter, portfolio manager with driehaus capital management joins us in the studio. you like japan. i hear that a lot lately. are you late for the dance?
>> we’ve been there for a while. i think people don’t believe -- there’s a lot of money parked on the sidelines in japan. almost 60% of japanese household assets are in the mattress or bank. unemployment coming down, people spend more, it has a big effect.
>> but that’s a constant, the asians are notorious savers. they save so much money and always save money. why will they suddenly start to spend? americans are spenders, asians are savers.
>> that’s true. but like in the asia crisis when thailand had trouble in 1997, they saw property prices moving up again and the economy get better, exports are strong, they start to spend. so i think the japanese may copy as property prices have stabilized and are not worsening and the bank is cleaning up, as well so i think the wealth effect will have an impact that will last longer than expected.
>> what is the best indicator that the japanese economy has turned around?
>> you look at corporate profits and we track all the companies that announce their numbers, a lot of companies are beating their numbers and revising up because they see demand is stronger than expected.
>> but those are export companies. the export and domestic economies are different animals.
>> in the past, japan only had the export economy of the u.s. and now they have china and the difference in this rally and other rallies is this time the properties, the retailers, the banks and domestic economy that’s been ignored is finally starting to perform.
>> let’s hop a flight to go south to indonesia where you like indosat as a stock right now. i can tell investors that it’s the second largest telephone company in the world. i believe fourth most populous nation, 230 million people. why indostat? indonesia is politically―is it politically stable enough to invest there?
>> it is. they just had an election and there were no terrorist bombs or any threats whatsoever and that made people feel pretty good but i like indonesia is their interest rates have almost halved in the last year from 15% to 7% so bank lending is taking off and the consumer is feeling better and one of the first things they do when they make more money is buy a cell phone and indostat is number two cell phone provider in innesia and grew 67% last year.
>> why not buy number one?
>> t.l.k., which reported numbers today, has had accounting problems. they were hiding some things and didn’t disclose it. indostat is better managed and they will gain on number one.
>> you had also mentioned the elections. i also read that jrt waranto, is back and he’ll challenge mag watty―megawati. that’s a potentially destabilizing development, is it not?
>> there’s another general that supposedly is very popular and i think they’ve tried to make the party for five years. if you bring somebody new in, a more technocratic guy, he could get more things done than keep the peace.%
>> you also like india. most recent filings show that icici is one of your top holdings. is it still?
>> we’ve sold it and bought it back. we still have some. i think india has the potential to doinant scaly well. the economy is doing -- fantastically well. it’s hard to find any country in the world like that.
>> eric ritter, thank you very much, hard to find a more well spoken international portfolio manager, with driehaus capital international discovery fund. lucent chief executive patricia russo has led lucent to three profitable quarters, but still shares down today. that story up next.
