INVESTING EMERGING MARKETS
World’s
hot spots
A
fter an appalling 2018, emerging markets
surprised investors with a strong start
to 2019. The Chinese sharemarket, for
example, jumped 29% over the first
quarter, recording its best performance
in more than four years. The rally was sparked by the
Federal Reserve’s backflip on raising interest rates.
China topped all sharemarkets, beating Colombia (up
19% for the quarter), Greece (18%) and the UK (16%).
At a time of low returns, investors are taking a renewed
interest in emerging markets. Some funds are bouncing
back into the black with, for example, State Street’s SPDR
S&P Emerging Markets exchange traded fund up 9.32%
over the three months to the end of March 2019.
But on the whole developed markets are still ahead –the MSCI World Index is up 4.6% over the year to March,
compared with -7.4% for emerging market equities.
Emerging markets had two stellar years before that
when they comfortably outperformed by 7%pa.
The long-term history of emerging markets often
reflects either remarkable outperformance or under-
performance, compared with developed markets.
The questions for investors are: does this represent
an opportunity and, if it is a good time to add emerging
market equity exposure, what is the best way to invest?
One way to look at emerging markets is that they offer
attractive valuations – particularly after negative returns
last year – in a world full of expensive sharemarkets.
“The valuations are fairly cheap,” says Geoffrey Wong,
head of emerging markets and Asia Pacific equities atSTORY SUSA N H E LYReturns are
bouncing
back but
investors
should be
prepared for
the downs as
well as the
ups