EGA Investment Strategy Commentary
Who is your EM strategy team?

Originally published March 2015; Updated August 2015

India is expected to have the fastest growing gross domestic product (GDP) rate in emerging markets in 2015 and is expected to surpass China by 2016. The EGA Investment strategy team believes it is not too late to invest in India and highlights five key reasons why investors should allocate to this reforming and growing economy. Read more...

July 2015

When approaching asset allocation, equity investors often follow a top-down, macro-economic approach to consider the merits of each country or region in their portfolio before considering the characteristics of individual securities. These allocations are generally made among the U.S., EAFE (Europe, Australasia and Far East), EM (Emerging Markets) and FM (Frontier Markets). We have noticed that many investors focus on riskiness or volatility of an asset class at the expense of the overall risk-adjusted returns or how different investments work together in a portfolio. The inclusion of EM and FM equities has reduced inter-asset correlation considerably and improved diversification. In fact, an allocation to EAFE provided no portfolio benefit-decreasing portfolio returns and increasing risk-while even a modest allocation to EM and FM increased overall portfolio risk-adjusted returns. Read more...

July 2015

In a rollercoaster quarter, the MSCI Emerging Markets (EM) Index held on to slender gains outperforming both the S&P; 500 (+0.3%) and the MSCI Frontier Markets (FM) Index (+0.1%). Inflows returned to EM equity ETFs as the U.S. Federal Reserve pushed back the timing of its first interest rate hike. In the Emerging Markets Update, the EGA Investment strategy team discusses the events in the second quarter and previews their thoughts on what's in store for 3Q15. Read more...

April 2015

The first quarter of 2015 has come to a close and investors are faced with an ever changing global economic landscape. With a change in market leadership as the MSCI Emerging Markets (EM) Index outperformed the S&P; 500 Index, the EGA investment team believes there is an opportunity for investors to be selective within EM and focus on those areas of potential growth. Read the latest strategy update which reviews the first quarter and highlights long term themes in emerging and frontier markets. Read more...

January 2015

Emerging market and frontier market equities had a volatile 2014, with wide dispersion in country and sector performances. The EGA Investment Strategy team recaps the highs and lows of 2014 and outlines notable geopolitical events that drove performance in the fourth quarter. Read more...

December 2014

Emerging markets have had a typically volatile year with divergence in growth, political reform and performance across regions, countries and sectors. The EGA Investment Strategy team examines the potential opportunities and risks to emerging market performance in 2015, as well as our perspective on where investors should allocate within emerging markets in 2015. Read more...

December 2014

The emerging market (EM) consumer theme is not new and research on this long term trend suggests that it should endure. Based on our own calculations, the quantum of EM consumption surpassed $11 trillion last year, with growth accelerating from 2003 onwards. The consulting firm McKinsey & Co. has called EM the "$30 trillion decathlon," forecasting that "by 2025, annual consumption in EM will reach $30 trillion, (nearly half of the global total)-the biggest growth opportunity in the history of capitalism" (Source: McKinsey & Company, "Winning the $30trillion decathlon," August 2012). At current trend rates of growth, emerging market consumption would surpass that of the U.S. by 2027. As such, we believe that harnessing the EM consumer trend should be central to most emerging market investment strategies. Read more...

November 2014

Frontier markets were the star performer in the third quarter of 2014, while the MSCI Emerging Markets Index fell. Read the latest update from the EGA Investment Strategy team discussing a review of third quarter market performance and a preview of the fourth quarter. Read more...

October 2014

Recent underperformance and asset outflows have contributed to investors' underweight in their emerging market allocations versus benchmark weights. The tide, however, may be turning. Compelling valuations, positive growth surprises, recovering profitability, and the potential for economic reforms provide the foundation for a recovery in emerging markets. This recovery could broaden to include cyclical sectors and value stocks that tend to do well when growth accelerates, liquidity is ample and risk appetite is increasing or high Read more...

September 2014

Dividends are an essential component of total return in emerging market equities, having accounted for 40% of the cumulative total return of the MSCI Emerging Market Index since its inception in 1987 (as of June 30, 2014). In this commentary, the EGA Investment Strategy team discusses the "Power of Dividends" and notes that there is scope for significant dividend growth through both higher corporate earnings and higher dividend payouts in emerging markets. Learn about what key sectors and countries are well poised to increase their dividend payouts. Read more...

July 2014

The first half of 2014 proved eventful for emerging and frontier markets as frontier markets led performance across global indices, while emerging markets experienced volatile fund flows and a wide dispersion in individual country performance. Expectations for reform, geopolitical events and monetary policy choices were some of the many factors that influenced markets. In the inaugural "Emerging Markets Update," the EGA Investment Strategy team provides a review of the first half of 2014 in emerging and frontier markets as well as previews what factors investors should watch for in the second half of the year. Read more...

Originally published February 2014; updated March 2015

After outperformance by consumer sectors over the broad MSCI Emerging Markets Index by over 50% since 2009, some investors wonder if the consumer theme has become overhyped and overvalued. We believe future earnings growth will support higher price to earnings (P/E) ratios. In this piece, we examine relative performance and valuation of comparators around the world. Using conventional valuation models to take into account both growth and profitability, we conclude that the Dow Jones Emerging Markets Consumer Titans 30 Index is at its intrinsic fair value. However, its multiple remains below that of many well-known household consumer companies. Read more...

Originally published February 2014; updated March 2015

Smaller, less developed Emerging Market (EM) economies, such as those that operate "Beyond the BRICs", and Frontier Market (FM) economies have the potential to generate growth that has been scarce since the financial crisis of 2008. However, investors face challenges accessing these investment opportunities due to the trade-off between portfolio liquidity and diversification. In this note, we identify and explore investment opportunities in Beyond BRIC EM and FM economies, which in our view offer the growth and diversification characteristics that are missing in mainstream EM indices today, as well as ways investors can access this exposure. Read more...

 

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