Given the tremendous growth in debt-financed activity, investors are rightly wondering whether China is near a tipping point where its credit boom becomes a credit bust. China recently made headlines when it allowed its first ever bond default. A second smaller bond default has occurred in the weeks since. Add to that various news stories…
“Equities (Still) for the Long Run: A New Look at the Equity Risk Premium” Michael W. Crook and Brian Nick, Journal of Investing vol 23, no. 1 (Spring 2014): 27–32. The poor performance of equities during the 2000s and the lack of a simple, sound model for estimating the forward-looking equity risk premium have led…
EM equity valuations are the key driver of returns over the long term. The benefit from valuation mean reversion should be substantial, as EM equities trade at a 35% discount to DM equities and a 45% discount to U.S. equities, compared to our assumed fair value discount of 10%. We expect EM equities to remain…
“What Happens in EM (Mostly) Stays in EM” Goldman Sachs, January 29, 2014 Problems common to multiple emerging markets have attracted increasing attention from investors, helping cause a global sell-off in January. While the domestic challenges for EM countries are likely to persist, argues Goldman Sachs’ economics research team, the risk that they will impact…
Africa’s changing political and economic landscape over recent decades offers investment prospects worthy of consideration. In this report, we address the key opportunities and risks associated with public (long-only and hedge funds) and private market investing in sub-Saharan Africa, with an emphasis on Frontier Africa. We find that public markets exhibit attractively low correlations to…
While access to the Chinese A-share market is improving, investors should not rush in. Given that the market is still evolving, finding a skilled manager to navigate the challenges facing the A-share market is key.
Despite recent weakness, we do not believe a 1990s-style emerging markets currency crisis is brewing.
While emerging markets equities remain attractive in the long term, the short-term risks posed by the European debt crisis and the potential for a global recession to pressure earnings growth merit caution. We recommend remaining at policy target allocations and considering building overweights on further weakness.
Many investors believe, as we do, that emerging markets offer a more compelling long-term growth story than do developed markets, and that portfolios should be tilted toward such regions to participate in this growth. However, before committing more funds to the area, investors should first re-evaluate how they allocate their exposure. While most allocations currently…
Allocations to emerging markets bond funds make sense from a strategic perspective, but the opportunity set offered by this evolving market is not static.