This year, emerging markets have been battered by weak markets, high inflation, and a strong U.S. dollar. While the S&P 500 is down 22% so far this year, the MSCI Emerging Market Index has fallen 29%. As a result, investors are running scared, having pulled $16 billion from EM mutual and ETFs since June.
But some strategists think the sector may be due for a comeback.
Columbia Threadneedle’s head of multi-asset strategy, Anwiti Bahuguna, told the Wall Street Journal that investors haven’t given developing markets enough credit for fighting inflation, describing the massive selloff as a sign of “extreme investor pessimism.”
Meanwhile, Clocktower Group chief strategist Marko Papic is bullish on emerging markets for two reasons. One, he believes that a weakening domestic housing market and the recent U.K. market turmoil will force the Federal Reserve to pivot. Two, China supporting the country’s real estate sector and easing up on lockdowns should boost its economy (not to mention this resurgence in China’s strength should also help other emerging markets heavily correlated with the country).
These strategists echo the sentiments of Morgan Stanley’s chief Asia and emerging market equity strategist, Jonathan Garner, who recently noted that EM stocks are “outstandingly cheap” and expected to rally.
Speaking with Garner noted that “we’re at very distressed valuations, very oversold” in the emerging markets equities space before adding that “[T]here are some signs already of healing in the leading edge of EM, i.e., in Korea and Taiwan,” Garner told CNBC’s “Squawk Box Asia.”
Morgan Stanley forecasts the benchmark to rally about 12% from now until June.
EMQQ Global has a suite of emerging markets exchange traded funds that provide exposure to the internet and e-commerce sectors within the developing world. These funds include the Emerging Markets Internet & Ecommerce ETF (NYSE Arca: EMQQ), the Next Frontier Internet & Ecommerce ETF (FMQQ), and the India Internet and Ecommerce ETF (NYSE Arca: INQQ).
By focusing on the internet and e-commerce in emerging markets, EMQQ looks to capture the growth and innovation happening in some of the largest and fastest-growing populations in the world. More than 60% of EMQQ’s assets are weighted toward China.
FMQQ, meanwhile, seeks to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the Next Frontier Internet and Ecommerce Index (FMQQetf.com). While it has the same investment philosophy as EMQQ, FMQQ has no China-based holdings. Securities must meet a minimum of a $300 million market cap and pass a liquidity screen that requires a $1 million average daily turnover.
Launched in April, INQQ intends to capitalize on India’s rapidly growing digital and e-commerce sectors. INQQ seeks to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the India Internet and Ecommerce Index.
For more news, information, and strategy, visit the Emerging Markets Channel.