If you want to buy into the dynamic growth business of emerging markets investment banking, you need to invest in emerging markets investment banks. Here are three prime examples (the third of which is primarily a fund manager):

• The Nomura Securities unit of Nomura Holdings Inc. (ADR: NMR): Japan might not be an emerging market, but its top investment bankers are paid a fraction of Wall Street’s head honchos, even though living standards are similar to the United States. The bad news first: It was horribly battered by the subprime fiasco, but has since exited that business. The worse news: Its top management is obsessed with competing in London and New York, and liable to waste yet more shareholder money attempting to do so. The good news: Nomura has a truly wonderful franchise, as the largest investment bank and brokerage house in the second-largest market in the world. It’s selling at an infinite Price/Earnings ratio, due to its U.S. losses, but only at about 1.2 times net asset value, a very reasonable rating indeed, and about eight times its peak earnings in the last cycle. It doesn’t pay a dividend currently, but I still like the franchise.

• Sun Hung Kai & Co. Ltd. (PINK: SHGKY or Hong Kong: 0086): This is Hong Kong’s largest independent investment bank and brokerage house, with operations in China and the Middle East. Its shares trade at a prospective P/E ratio of 4.6, and feature a dividend yield of 6.1%. It’s illiquid in the U.S. market, so if your broker deals through Hong Kong, you may want to buy there. Still, you have to like the rating, and it’s particularly attractive for income investors.

• Fondos Provida SA (Chile) (ADR: PVD): Primarily a funds manager of the privatized Chilean social security funds, the business has diversified to hold investments in fund administrators in the emerging markets of Peru, Ecuador, Mexico and the Dominican Republic. It is majority owned by the Banco Bilbao Vizcaya Argentaria SA (ADR: BBV). Its shares are trading at nine times trailing earnings, and feature a dividend yield of 7.6% – again, especially alluring for income investors.

P.S. An investment banker with more than 25 years’ experience, Money Morning contributing editor Martin Hutchinson has worked on both Wall Street and Fleet Street and is a leading expert on the international financial markets. At Creditanstalt-Bankverein, Hutchinson was a senior vice president in charge of the institution’s derivative operations, one of the most challenging units to run. He has also served as a director of Gestion Integral de Negocios, a Spanish private-equity firm, as an advisor to the Korean conglomerate, Sunkyong Corp., and worked extensively in the emerging markets of Bulgaria, Croatia and Macedonia to help stabilize, what at the time, were fledgling economies.

Source: How to Profit From the Emerging Markets Investment Banking Boom

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