Emerging market stocks, as measured by the MSCI EM Index, have seen more than a quarter of their value wiped out in the past four months, led by the travails of the Chinese stock market. We are not saying that now, or next week, or next month will represent the ideal buying point. We believe there is further disruption ahead, with suggestions that the devaluation by the Chinese central bank in August did not go far enough, and with others calling for a more profound market-clearing event to cleanse the final remnants of the price inflation seen earlier this year.

Many have been trying to call the bottom of the market; what we would say is that we are beginning to see tentative indications of discrete, selective buying of the babies that have been thrown out with the bathwater. We don’t think there is ever a bad time for rigorous, bottom-up analysis of companies exhibiting strong fundamentals. We do think that now looks like a particularly good moment to put old-fashioned research skills to work, and particularly in China.

It has been a stomach-churning summer. A mere 12 months ago, China was stumbling through its fifth year of sluggish stock returns, a bear market brought about by a slowing economy and concerns about the sustainability of the government’s economic liberalisation programme. The ride since then has been frantic and furious, with the Shanghai Stock Exchange surging more than 150 per cent in a year, buoyed by manic, largely retail-driven speculation, before hitting the skids in spectacular fashion. From peak to trough (thus far), the index has lost over 40 per cent of its value, with almost 9 per cent of this wiped out on China’s own Black Monday, the August 24. There has been government intervention, investor panic, numerous involved articles and research pieces trying to sift through the wreckage, all illustrated with pictures of Chinese everymen (and women) staring glumly at screens of falling stock quotes.