Recent Developments & Outlook
Emerging Markets equities continued to weaken in July. The MSCI Emerging Markets Total Return Index
declined 3.8 % in US dollars and 2.8 % in euros.
Year to date, the Emerging Markets benchmark is down 15.1 % in US dollars and 20.4 % in euros.
The US dollar gained 1 % versus the euro last month, but has lost 6.3 % during the first seven months of this year to 1.5603.
Of the three major regions, Asia declined 0.9 %, Europe, Middle East and Africa (EMEA) 4.5 % and Latin
America 8.6 % in July. Year to date, Latin America continues to lead with a tiny 0.1 % decline, while Asia is down 22.7 % and EMEA is 10.6 % lower.
All performance numbers are in US dollars unless mentioned otherwise.
In July, ten markets included in the MSCI Emerging Markets Index rose and fifteen markets declined. Turkey
(+28.3 %), Poland (+12.6 %) and Hungary (+10.3 %) — all “Buy”-rated markets and constituents of the Emerging Markets Top Value Model Portfolio —led this month’s winners’ list.
Argentina (-19.3 %), Pakistan (-18.4 %) and Peru (-16.3 %) performed worst in July.
Year to date, seven markets rose and eighteen declined. Morocco was in the lead with a return of 26.3 %. Argentina (+16.8 %) and Jordan (+15.8 %) came in second and third.
India (-37.4 %), Pakistan (-33.3 %) and the Philippines (-32.9 %) performed worst during the first seven months.
There is one change in our performance ratings this month: Israel is downgraded to “Neutral” from
Israel had been “Buy” rated since the end of December 2007. During the last seven months Israel declined by
1.4 % in US dollars. During the same time the MSCI Emerging Markets Index lost 15 %. Rather than being caused by a deterioration of the fundamentals of the market itself, the drivers for the downgrade had their origin in the fact that the other markets we hold have become much more attractive, i.e. the opportunity costs of holding Israel have risen to a level where we can no longer “afford” Israel considering the alternatives.
Taking this decision into account, the Top Value Model Portfolio now contains the seven national MSCI markets Hungary, Korea, Malaysia, Poland, Taiwan, Thailand and Turkey at equal weights.
According to our performance ratings, these markets offer the highest expectation of risk-adjusted returns for long-term investors
SELL CANDIDATES (Low Value) China , Egypt , India , Indonesia , Jordan, Morocco.
NEUTRALLY RATED MARKETS Argentina, Brazil, Chile, Colombia, Czech Republic, Israel, Mexico, Philippines, Pakistan, Peru, Russia, South Africa, Sri Lanka, Venezuela,
For more details on Keppler’s analysis, contact Roderick Cameron at 1-212-245-4304 or email email@example.com
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