Emerging market interest resumes in Asian equities
The re-opening of markets in Asia following the easing of COVID-19 restrictions has revived investor interest in emerging markets.
This was particularly the case in markets such as China, which emerged first from the restrictions, and Taiwan and South Korea where countries were restarting manufacturing and production. Meanwhile, consumers in those regions had returned to school, work and shopping activities.
According to FE Analytics, MSCI Korea had returned 37% over the past year to 8 December, Taiwan had returned 34% and China had returned 24%. The wider emerging markets index had returned 12% which compared to returns of 9% by the S&P 500 over the same period.
Valuations in emerging market equities were trading at a discount to historical average; they tended to trade at a 20% discount to the S&P 500 but were currently trading at 30% discount.
American Century Investments senior portfolio manager, Patricia Ribeiro, said: “We believe this momentum is set to continue as investor sentiment improves. When combined with extraordinary fiscal and monetary stimulus from global central banks in response to COVID, global liquidity could potentially sustain – if not lift – emerging market equities even further.
“Strong headwinds do still remain, and while China’s domestic activities have normalised, caution is still required, particularly until such time as the virus is fully contained.”
Since the start of the year to 30 November, the best-performing fund in the emerging market sector was Northcape Capital Emerging Markets which returned 29.8% followed by GQG Emerging Markets Equity which returned 19.6%.
The worst-performing fund was Lazard Emerging Markets Equity which lost 12.3%.
Looking at Asian markets specifically, the best fund was Saville Capital Emerging Companies which returned 60.7% while the worst fund was Maple-Brown Abbott Asia Pacific Trust which lost 4.6%.
AUTHOR
Laura Dew
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