In addition, while we don’t expect a boom in any of the larger EM economies, we do expect stability in 2014. And there are at least some positive catalysts on the horizon. Most notably, following a lukewarm initial reaction, investors are now starting to warm to the fact that China appears serious about reforming its economy.
In terms of specifics, we continue to see opportunities in Chinese equities. Despite the recent rally, valuations remain low and growth, while slower, is still better than any other large country. As I’ve advocated before, broaden the definition of EM to include a small allocation to frontier markets. Despite the travails of EM, the frontier markets are up over 20% year to date.
Finally, investors may also want to consider domestic companies levered to China and the rest of Asia, where spending continues to grow. One recent example, in the last quarter Tiffany reported a 27% jump in Asia-Pacific sales.
Russ Koesterich, CFA, is the Chief Investment Strategist for BlackRock and iShares Chief Global Investment Strategist. He is a regular contributor to The Blog and you can find more of his posts here.
Source: Bloomberg