Emerging Market Stocks’ Dive to 17 Month Lows
- Emerging market asset prices have been hit hard this year.
The deep dive in emerging market stocks YTD is attracting some US fund managers who think they may find long-term bargains in the sell-off.
Portfolio managers have been adding emerging markets stocks to their portfolios in the face of the imposition of import tariffs by President Trump and rising interest rates in the US.
Emerging market asset prices have been hit hard this year.
The MSCI index of emerging market stocks closed Friday at its lowest since May 2017 and it is down about 21% from January’s high. An MSCI index of emerging market currencies is down 8% from its 2018 high, hit in March.
JPMorgan has cut its rating on Chinese equities, the largest weight on the benchmark index, to neutral from overweight on expectations that a protracted trade dispute with the United States will hurt the Asian giant’s economy next year.
Yet some US international and global fund managers say that emerging markets offer better deals than the US market, where stocks continue to mark record highs.
Investor concern about the impact of the trade dispute has sent stocks in China and other emerging markets sharply lower this year.
People are slow to come around to the realization that the US is not going to close its borders to all emerging markets, Thai and Vietnamese companies could stand to benefit if the US and China continue to slap tariffs on each other’s goods.
Overall, US global funds have nearly 7% of their portfolios in emerging market stocks, a 25% increase from 3 years ago, according to data from Lipper.
If you are going to play in these markets be very selective in where you look for exposure in emerging markets. Look for countries with a large USD reserve, direct trade partners with the US and that have less exposure in terms of exports to China.
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