While the long-term case for emerging markets equities remains intact, now is not the time to overweight emerging markets equities as soaring valuations and a blind faith in “decoupling” leave them quite vulnerable in the near term.
Contrary to popular belief, aggregate yields on local currency emerging markets debt do not offer a premium to US$-denominated debt on a currency-adjusted basis; however, given the breadth and relative inefficiency of the local currency market, we continue to believe active managers should be able to add value.
A primer designed to help investors navigate the often bumpy road of investing in emerging markets equities. Topics covered include rationalizations, concerns, and strategies for investing in emerging markets equities.
While we continue to believe in the long-term opportunity in emerging markets equities, prices have become excessive relative to fundamentals.
While the external debt market continues to fade away, rapidly expanding local currency markets offer opportunities for enterprising investors.
Investors in China-based indices should recognize their new exposure to the big Chinese banks in the aftermath of the banks’ IPOs—and the potential risks inherent in such exposure.
Hong Kong-listed stocks provide direct and indirect exposure to China. Investors should be aware that mainland Chinese companies play an increasingly prominent role in Hong Kong’s stock exchange but that exchange-tracking indices significantly differ in the degree to which they include Chinese shares.
Emerging markets equities, while still attractive relative to developed markets, are not especially cheap in absolute terms.
While much of the rally has been powered by fundamentals (i.e., rapidly rising earnings), recent returns have been boosted by enormous fund inflows that suggest a bit of frothiness is creeping into the asset class.
This report suggests that India is among the most attractive regions for venture investing in Southeast Asia, and the software and telecom sectors appear particularly promising. Also included is information on 21 partnerships already invested in Indian venture capital.