‘Trump Wins Big’ Lessons for Smarter EM Investing
Bloomberg
23-05-18 05:03
Emerging market (EM) stocks are trading at a discount in comparison to developed world equities, with the spread of price/book multiples indicating EM is cheaper compared to developed markets than at any other point this century. Indications are that it is time to rethink how investors approach EM investing, particularly in respect of indexing which looks at market cap.
Indexing can be a challenge in many emerging markets since the larger companies are often formerly state-controlled, monopolies, in utilities or banking–and while they may be the largest companies, their growth prospects aren’t thought to be exciting, so it makes little sense to direct investment there.
In China, it seems that after a four-year rally in consumer tech stocks, Chinese state-owned enterprises (SOEs) have led the markets following a government clampdown. The crackdown has created the opportunity to buy non-SOE companies while they are cheap.