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Any veteran investor will tell you that financial markets overshoot when trouble hits, but what if that market is the world's second-largest economy and the government has decided the rules of the game have changed?
According to the publication, investors have also pointed to the low valuations that some emerging market assets have as an advantage, especially at a time when many consider US stocks to be overvalued.
On 27 January, the MSCI Emerging Markets index traded at 16 times expected earnings (over the next 12 months), according to
Bloomberg. In comparison, the S&P 500 had a PE ratio of 22 times on the same day.
Sustainable gains across the board
The iShares MSCI Emerging Markets ETF [EEM], which is considered to offer the broadest exposure to emerging markets, has gained 11.06% in 2021 so far (through 11 February’s close). The iShares ESG Aware MSCI EM ETF [ESGE], which focuses on more sustainable companies, has gained 11.23% in the same period, while the Goldman Sachs ActiveBeta Emerging Markets Equity ETF [GEM] has grown 9.27%.
The MSCI Emerging Markets Index could climb to 1,450 points by the end of 2021, according to the wealth management arm of UBS Group AG, which has more than U$4 trillion assets under its management. In a bull case, the index could rise further to 1,600, UBS Wealth Management projects. EMERGING markets have had a strong start to the year, as investors, hunting for returns, put huge bets into a group of up to 30 major developing economies.
They are banking on emerging markets’ strong rebound from the fallout of Covid-19 pandemic and huge growth potential ahead for maximum returns.
A report by Financial Times over the week indicated investors have piled around US$17bil into emerging-market assets during the first three weeks of January, citing data from the Institute of International Finance. Another media report, quoting JPMorgan, suggested investors have poured up to US$25.4bil into emerging-market bond and equity funds in the first three weeks of the year.
UBS Wealth Says Itâs Time to Bet Big on Emerging Markets Shares
This content was published on January 27, 2021 - 09:30
January 27, 2021 - 09:30
(Bloomberg) Emerging-market stocks, particularly those in Russia and Latin America, will be the hottest items for equity investors this year. Thatâs the view of the wealth management arm of UBS Group AG, which oversees more than $4 trillion for its clients.
A reviving global economy helped by vaccine rollouts, reduced uncertainty around U.S. foreign policy, a weaker dollar, stronger commodities and stimulus in major markets should all align behind this theme.
In response, UBS Wealth Management has shifted its preference in equities to developing countries, which are more sensitive to global growth and are cheaper than developed markets. MSCI Inc.âs emerging-market index trades at 16 times expected earnings in the next 12 months, well below a P/E ratio of 22 times for the S&P 500 and less than the 17 times for the Stoxx E