Hot Money Exiting Emerging Assets Is Buy Trigger for Maersk CEO

APM Terminals Pecém, Brazil, Image: APM Terminals

March 3 (Bloomberg) — A.P. Moeller-Maersk A/S, Denmark’s biggest company, is using a slump in emerging markets as an opportunity to invest, Chief Executive Officer Nils Smedegaard Andersen said.

“When we invest in ports and other infrastructure projects, we’re often competing with financial investors,” the 55-year-old CEO said in a phone interview. “With fewer financial investors interested in growth markets, that can open up investment opportunities for us.”

Maersk, which owns a container line, a port operator and an oil division, invested about $7 billion globally last year, focusing on emerging markets. This year’s rout from Argentina to India won’t prompt the company to scale back its commitment to the group of countries, Andersen said.

“I will travel a lot to emerging markets this year, which is where the biggest opportunities for infrastructure investment are,” said Andersen, whose company employs 89,000 people in 135 countries. “I was in Africa for a few weeks earlier this year and have scheduled travels to China and South America. Our investment strategy will focus on these growth markets. We have to think counter-cyclical.”

Investors have fled emerging markets this year as the U.S. Federal Reserve pares its record stimulus measures. A slowdown in manufacturing in China and political unrest in Ukraine have added to the uncertainty. Global investors pulled $3 billion from emerging-market funds in the week ended Feb. 26, the 18th week of outflows, according to Citigroup Inc., which cited data from EPFR Global.

Bigger Returns

An exit by short-term investors from emerging markets will help buyers like Maersk generate bigger returns, Andersen said.

“In general, these financial investors tend to settle for lower returns than we do; we want double-digit returns,” he said.

Maersk’s investments last year included container terminals in Brazil, Mexico and Russia and building up its oil exploration business offshore Angola.

“When we invest in a port in a growth market, we spend a mix of the local currency and U.S. dollars, so in the short term our investment costs may be a bit lower,” Andersen said. “And when the port is up and running, we tend to get payments in dollars in the transport industry, so in that way we’re pretty well covered.”

Maersk is planning to shift some investments to its oil, ports and drilling businesses and away from its container line division, which has been hurt by overcapacity in the industry.

Maersk’s earnings before interest and taxes fell to 9.46 billion kroner ($1.73 billion) in the fourth quarter, the company said last week. That missed the 10.6 billion-krone average of analysts surveyed by Bloomberg. Profit was hurt by lower freight rates at its container line and a decline in its oil unit’s share of production.

– Christian Wienberg, Copyright 2014 Bloomberg.