Even with its significant exposure to smaller stocks, TLTE’s valuations are mostly inline with the MSCI Emerging Markets Index and well below those of major U.S. equity benchmarks.
“We believe emerging market valuations are attractive relative to other markets, as emerging market equities are up just 23% over the last 10 years, compared with a 146% total return from the S&P 500 Index,” said FlexShares. “This leaves the emerging markets index trading at 12 times forward earnings, as compared with 14 times in developed ex-US markets (MSCI Developed ex-U.S. Index) and 17 times in the U.S (S&P 500). We believe this provides some valuation support for emerging market equities. While valuations don’t necessarily help a region’s near term outlook, they may offer support over a longer-term horizon.”
TLTE allocates over 42% of its combined weight to financial services and technology stocks. China, South Korea and Taiwan are the fund’s largest geographic exposures, combining for over 61% of its weight.
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