What's Going On?
Why the "dirty laundry" in emerging markets this year versus
developed markets which have soared?
On the move down in emerging markets there have been four (4)
- Global growth questions
- Country specific political and policy questions
- Current account and macro pressure coming from change in
- Tapering leads to actual reallocation of money away from EM
Not all has been bad for emerging markets if you are a stock
picker or follow momentum.
For example, Chinese internet stocks are soaring +50% this
year and some valuations still look interesting if you consider
the delivery of revenues from mobile and search we are seeing
from the major players,
Other areas where stock pickers in emerging markets have made
Consumer non-Cyclical and Consumer Cyclical have done
Russia - largest discount supermarket chain
) South Africa - branded and generic pharm supplier
Unilever Indonesia (
) Consumer non-cyclical
) +25% in Brazil - electronic payment solutions
Mercado Libre (
) +53% Latin America eBay meets Craig's List ….
) in South Africa
) in Brazil airline manufacturer
in SK +3te4% air purifiers clearers water treatment
Things will get better and the inflation growth tradeoff gives
opportunities in bombed out places like Brazil and India…but
these areas will probably need to see more Fed unwinding.
) -30% in USD terms trades at 4.2% div yield
The trade right now is to bet on those companies who are well
positioned to see follow through on European Union and global
domestic market recovery.
Overall playing in emerging markets with a couple of years'
time horizon seems opportunistic, especially based on
multiples. The MSCI EM (MXEF) is 11.2x current 9.5X 2014
P/E If you are playing the iShares MSCI Emerging Markets (
), $36.50 is the 18 month support on EEM or 880 on MXEF MSCI
If you want to play a lower volatility core EM index that has
outperformed the EEM, try iShares MSCI Emerging Markets Minimum