NEW YORK (The Street) -- What do McDonald's (MCD), Coca-Cola (KO), Philip Morris (PM) and PepsiCo (PEP) have in common aside (ahem) from being champions for good health? All have sizable emerging markets exposure, an asset class that has roiled world equities this year, with expectations of more volatility to come.
Fund managers cautioned investors to be aware of this risk, even if they do not advocate a selloff of vulnerable stocks.
Wells Fargo Funds Management chief equity strategist John Manley pointed to consumer staples as an exposed sector. "Emerging markets are viewed as the largest part of the growth potential for these stocks," he said in a phone interview. "It's a risk, but it's not enormous."
Manley also pointed to the exposure of large U.S. banks, noting they tend to place larger bets in emerging markets amid a slower growth trajectory for developed nations.
Citigroup (C) this week received subpoenas from the Federal Deposit Insurance Corp. and U.S. prosecutors after disclosing allegedly fraudulent billing at its Mexico arm that cost it up to $400 million. The bank also has investments in Ukraine and Russia, with around $10.3 billion in net exposure to Russia, the highest among major U.S. banks, according to analysis from Royal Bank of Canada.
The energy sector has large multinational exposure, with Chevron (CVX) this week being forced to boost its staff security in Ukraine's shale fields. Royal Dutch Shell (RDS.A) and Exxon Mobil (XOM) drill for oil and gas in Russia while Siemens (SI) had plans to build rail infrastructure in Ukraine.