• Chinese Financials within DEM: As a sector, Chinese Financials within DEM outperformed the MSCI EM by approximately 1.5% over this period. Relative to what we saw in the Russian Energy sector, the performance of DEM’s top three holdings in the sector was clustered much more closely together. China Construction Bank (average weight of 4.38% for period) led the way, but Industrial & Commercial Bank of China (average weight of 3.13% for period) and Bank of China (average weight of 2.04% for period) also outperformed the MSCI EM. After this period of positive performance, each of these three stocks still had a P/E ratio below 5.0x.4
Average Annual Returns for DEM
Cumulative Performance over Last Two Months (3/21/14–5/23/14)
Gauging Sentiment: Dire to Less Dire
What we seem to see here is not that the risks to Russian Energy firms or Chinese Financials have completely abated—they’ve just receded a bit and seem less immediately dire. Sometimes in emerging markets, the movement in sentiment from dire to less dire could lead to positive performance, and we look forward to seeing if this two-month rally can continue.
1Source: Bloomberg, as of 5/23/14.
2Source: Matthew Philips, “Is the Russia-China Gas Deal for Real—or Just Fumes?” Bloomberg Businessweek, 5/21/14.
3Source for P/E ratio data: Bloomberg, as of 5/23/14.
4Source: Bloomberg, as of 5/23/14.
Important Risks Related to this Article
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