As Zimmerman notes, “ex-State-Owned Enterprises Index displayed higher growth expectations.2 Firms that have exhibited higher growth typically trade at premium earnings multiples, and they also tend to have lower dividend yields because they reinvest the majority of their earnings.”

There have been instances where investors have been rewarded for taking on those higher multiples with emerging equities the state does not control. Just look at Baidu (NasdaqGS: BIDU). Baidu, the Google of China, has surged nearly 450% over the past five years, a performance that the likes of Petrobras and state-run banks could only dream of.

XSOE Top Holdings

Table Courtesy: WisdomTree

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