An Investor's Guide to Emerging Markets

Emerging market investing brings its own unique set of challenges. This week we will examine the opportunities and risks offered by this group of countries

Emma Wall 10 July, 2017 | 9:29AM
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Over the past five years, investors in developed markets have not had to look far for growth opportunities. Stock markets in the US, UK and Europe have delivered significant returns to equity investors – and even fixed income has performed well despite record low interest rates thanks to economic uncertainty.

But 2017 has seen an about turn in fortunes, with emerging markets outperforming developed ones year to date: The MSCI Emerging Markets index has beaten the global index over the past 18 months.

After such a strong run in developed markets, it is inevitable that valuations begin to look stretched, especially in the US. But will emerging markets provide a compelling alternative for investors looking for capital growth and income?

“Looking to the future, it is clear that recent performance has weakened the valuation argument in favour of emerging markets, with valuation levels now close to average, both in absolute terms and relative to global equities,” said Morningstar analyst Simon Dorricott.

“That said, within the diverse markets in the emerging space there will always be areas of value for active managers to exploit, be they short-term traditional value opportunities or longer-term under-appreciated growth situations.”

Dorricott also expects earnings to pick up, following years of flat or negative numbers, driven by the technology, financials and energy sectors.

But emerging market investing brings its own unique set of challenges; corporate governance, state owned enterprises and stock markets which are more closely linked with economic health to name a few. This week we will examine the opportunities and risks offered by this heterogenous group of countries, and whether you should be adding exposure to your portfolio.

Monday: What is an Emerging Market?

We go back to basics for new investors and those who need a refresher

What is an Emerging Market?

What is a Frontier Market?

How Currency Impacts Emerging Market Bond Investing

Earnings Drive Emerging Market Gains

3 Biggest and Best Emerging Market Funds

Are Emerging Markets Still Cheap?

Tuesday: Investing in Asia

China, India, South East Asia and everything in between

How Does China Impact Emerging Market Investing?

China: Investor Fears Subside as Economy Grows

Belt and Road: An Investment Opportunity?

Aberdeen's Kaloo: India is the Top Emerging Market

Wednesday: Latin America Investing

Is now the time to invest in such a commodity heavy market?

Mexico Stock Market Outlook Dampened by Trump

Why Argentina is Not an Emerging Market

Political Crisis Threatens Brazil's Recovery

2 Top Rated Latin America Funds

Brazil Market Doubles Over 12 Months

Thursday: Russia and Emerging Europe

How the east is benefiting from recovery in the west

Eurozone Growth Boosts Emerging Europe Stocks

Why Russia is an Attractive Investment Opportunity

3 Reasons to Invest in Emerging Europe

Aviva: Russia Bonds are No Longer Good Value

Russia: More than Just an Oil Producer

Friday: Adding Emerging Markets to Your Portfolio

How, when and why invest in emerging markets

Hermes' 3 Top Stock Picks from Emerging Markets

Using Currency to Hedge Risk in Emerging Markets

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

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About Author

Emma Wall  is former Senior International Editor for Morningstar