Changes Emerge in Value

by | Apr 17, 2013 | Archives

There was a huge global stock market change in 2010.  This change increased the need to look for emerging stock market value.

In the past the best way to gain appreciation was to invest merging markets as they enjoyed faster growth.  Beginning this decade this site warned that the values had flipped and developed markets were now more attractive than emerging.

The results of the past two years shown in the charts indicate that this change is a fact.

World & EAFE indices have performed far better than the emerging markets index.

One easy way to invest in the global economy is with the MSCI World Index ETF that tracks the MSCI Index of of 6,000 companies in 24 developed stock markets. chart

MSCI World ETF (symbol URTH)chart at

This ETF seeks to replicate, net of expenses, the MSCI World Index.

If one just wants to diversify outside North America they can use the EAFE ETF (symbol EFA).   This index measures developed markets excluding the U.S. and Canada. EAFE stands for Europe, Australasia, and the Far East which follows 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom. chart

MSCI EAFE ETF chart at

Emerging Markets (symbol EEM)

The MSCI Emerging Market ETF aims to replicate the index composed of 21 developing countries: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Hungary, India, Indonesia, Korea, Malaysia, Mexico, Morocco, Peru, Philippines, Poland, Russia, South Africa, Taiwan, Thailand, and Turkey. chart

MSCI Emerging market chart at

In the past there was a good chance that if you invested in an emerging market for long… you would see nice appreciation.  This is no longer true.  Examination of these market’s values is more important than ever before.

This is why once a quarter we look at the emerging equity market valuation analysis by Michael Keppler.  Michael’s firm is the best when it comes to value analysis of stock markets.

Here is an update on the values of emerging stock markets by Keppler Asset Management.

Fwd: keppler

Michael Keppler

If you are a new multi currency subscriber learn about Keppler Asset Management here.

Here is Keppler’s Emerging Market Analysis as of April  12, 2013.

Emerging Markets equities moved sideways in the first quarter. The MSCI Emerging Markets Total Return Index (December 1988 = 100) declined 0.5 % in local currencies and 1.6 % in US dollars. However, due to the decline of the Euro in the first quarter, it rose 1.0 % if performance is measured in Euros. Over the last 15 months, the MSCI Emerging Markets Total Return Index is up 16.4 %, 16.3 % and 17.6 % in local currencies, US dollars and Euros, respectively. The index now stands at $ 1,348 and € 1,157. The Euro lost 2.6 % versus the US dollar in the first quarter and at the end of March stood at 1.2841 (USD/EUR), down 1.1 % compared with its level of 1.2982 at year- end 2011.

Among the three regional indices, Asia gave up 0.1 %, Europe, Middle East and Africa (EMEA) declined 1.1 % and Latin America lost 1.2 %. Over the last 15 months all three regional indices are up: Asia by 17.7 %, EMEA by 19.6 % and Latin America by 10.9 %. Performance numbers are in local currencies unless mentioned otherwise.

Ten Emerging Markets advanced and eleven markets declined last quarter. The Philippines skyrocketed 17.9 % followed by Indonesia (+14.3 %) and Turkey (+9.7 %), while the Czech Republic (-9.5 %) Poland (-7.0 %), and China (-4.4 %) performed worst in the last three months. Over the last 15 months, Turkey (+70.2 %), the Philippines (+61.7 %) and Egypt (+46.7 %) performed best. Morocco (-13.9 %), the Czech Republic (-10.1 %) and Chile (+2.2 %) came in last.

The Top Value Model Portfolio based on the Top Value Strategy (December 1988 = 100) declined 0.9 % in local currencies, 3.9 % in US dollars and 1.3 % in Euros last quarter. Over the last 15 months, the Top Value Strategy gained 19.9 % in local currencies, 20.2 % in US dollars and 21.5 % in Euros.

There was only one change in our performance ratings last quarter: Egypt was downgraded to “Neutral” from “Buy” due to concerns about its political future.

This was a rare exception to our process, where qualitative aspects cause a veto of our quantitative investment process. In the case of Egypt “Return of the Money” had become more important than “Return on the Money”.

The Top Value Model Portfolio now contains the ten national MSCI markets Brazil, China, the Czech Republic, Hungary, Korea, Malaysia, Poland, Russia, Taiwan and Turkey at equal weights. According to our performance ratings, a combination of these markets offers the highest expectation of long-term risk-adjusted performance.

The following table shows how the Emerging Markets Top Value Model Portfolio compares to the MSCI Emerging Markets Index at the end of March 2013, 2012 based on selected asset and earnings valuation measures:

Michael Keppler New York, April 12, 2013

Emerging markets do not have the overwhelming extra potential that they had for the previous three decades.    Always look for value when you invest, but in this decade look extra hard when investing in emerging markets.


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