Emerging market equities well positioned post recovery
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    Emerging market equities well positioned post recovery

    17 June 2021

    There are a number of indicators supporting emerging market (EM) equity growth in the second half of 2021.

    1. Relatively attractive valuations. Data compiled by Bloomberg shows the 12-month forward P/E ratio is 14x for emerging markets and over 20x for developed markets (DM). Also, the 5-year average forward P/E ratio of EM against DM is currently sitting at 0.74, indicating that EM stocks are cheaper than their DM peers. 


    Chart 1: P/E ratios of EM versus DM

    imagetools0.png
    Source: Bloomberg as of 31 May 2021

    2. Vaccine rollout to recovery. Last week the G7 Summit concluded with a pledge of one billion COVID-19 vaccine doses to developing nations. With a continuing vaccine rollout and global supply chain resumption, the expectation is that EM corporate earnings will improve along with overall optimism in the equity markets.

    3. Value prevails.
    The Value factor has been a dominant force in EM equities for the past 6 months. Traditionally Value stocks, for example, Materials, Energy and Financials, have outperformed coming out of a recession.

    Chart 2: Active Factor Returns in EM

    Factor

    1 Month

    3 Months

    6 Months

    1 Year

    3 Years (p.a.)

    5 Years (p.a.)

    10 Years (p.a.)

    15 Years (p.a.)

    Growth

    -1.52%

    -3.32%

    -4.34%

    0.72%

    3.21%

    2.86%

    2.33%

    1.03%

    Momentum

    -0.71%

    -2.67%

    -1.11%

    7.72%

    6.10%

    4.84%

    3.44%

    2.66%

    Multi-Factor*

    0.08%

    4.61%

    5.08%

    -0.88%

    -3.04%

    -0.75%

    0.70%

    1.87%

    Quality

    2.05%

    3.95%

    3.32%

    0.90%

    1.38%

    -1.25%

    0.96%

    1.90%

    Value

    1.57%

    3.55%

    4.70%

    -0.88%

    -3.49%

    -3.08%

    -2.48%

    -1.17%

    * MSCI Emerging Markets Diversified Multiple-Factor Index. Source: Bloomberg as of 31 May 2021.

    VanEck’s MSCI Multifactor Emerging Markets Equity ETF (ASX code: EMKT) tracks the MSCI Emerging Markets Diversified Multiple-Factor Index. The index targets exposure to Value, Momentum, Low Size and Quality factors.

    IMPORTANT INFORMATION
    VanEck Investments Limited ACN 146 596 116 AFSL 416755 (‘VanEck’) is the responsible entity and issuer of units in the VanEck Vectors MSCI Multifactor Emerging Markets Equity ETF (EMKT]. This is general advice only, not personal financial advice. It does not take into account any person’s individual objectives, financial situation or needs. Read the PDS and speak with a financial adviser to determine if the fund is appropriate for your circumstances. The PDS is available here.

    An investment in EMKT carries risks associated with: emerging markets, financial markets generally, individual company management, industry sectors, ASX trading time differences, foreign currency, country or sector concentration, political, regulatory and tax risks, fund operations, liquidity and tracking an index. See the PDS for details.

    No member of the VanEck group of companies guarantees the repayment of capital, the payment of income, performance, or any particular rate of return from any fund.
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