First, here is the opportunities for investors.
Emerging markets offered a 40% discount last week. Now they offer better value. See why and what we will predict at our upcoming International Investing and Self Publishing seminar coming up Feb. 14, 15, 16.
Image Wall Street Journal article U.S. Markets Tumble as Fear Spreads by Prabha Natarajan, Nicole Hong and Chris Dieterrich.
The current stock market slide will generate fear in many investors. However, we should feel opportunity instead. This shift is creating the next great breakout.
Friday’s WSJ article “U.S. Markets Tumble as Fear Spreads” article said: “Stocks Post Worst Loss in Seven Months as Investors World-Wide Confront Pullback in Stimulus, Growth Worries.“
The article told how this plunge will make emerging markets plunge even more. This sector was already shaping into a huge bargain due to a factor called the “Small Country Effect”.
There was a short term anomaly during the big 2009 market correction that threw the average price of developed stock markets below that of emerging markets… especially in Europe. That distortion disappeared last year and Keppler Asset Management’s latest analysis shows that emerging markets remain less expensive (by far) than developed markets. The 2013 run-up of equities has pushed developed market equity prices near all time highs. The chart below shows why emerging markets are now overall a better value than developed markets.
The average p/e ratio for developed markets has risen to 17.9. Emerging markets overall are at a much lower p/e average of 12.1. Even better Keppler Asset Management’s Top Value Emerging Markets are valued at a lower 10.7 p/e ration as shown in the chart below.
See the nine Top Value Emerging Markets below.
Once a quarter we review all developed multi currency equity markets through the Keppler Asset Management’s Global Market Value analysis.
If you are a new reader learn about Keppler Asset management here.
Multi Currency Emerging Market Value Update Winter 2014. Recent Developments & Outlook
Emerging markets equities have disappointed both in the last quarter in 2013. In the fourth quarter 2013, the MSCI Emerging Markets Total Return Index (December 1988 = 100) advanced 3.0 % in local currencies and 1.8 % in US dollars.
Due to the ongoing strength of the Euro, however, the global emerging markets equity benchmark was flat in Euros last quarter.
While the emerging markets benchmark was able to eke out a 3.4 percent total return in local currencies last year, weak local currencies kept their pressure on the 2013 benchmark returns in US dollars (down 2.6 %) and Euros (down 6.8%).
Among the three regional indices, Asia gained 3.6 %, Europe, Middle East and Africa (EMEA) advanced 2.4 % and Latin America gained 1.3 %.
Year-to-date, only Latin America continues to show a negative total return (-4.6 %), while EMEA is up 7.2 % and Asia gained 5.2 %. Performance numbers are in local currencies unless mentioned otherwise.
Fifteen markets advanced and six markets declined over the last quarter.
Egypt (+20.4 %), India (+9.0 %) and South Africa (+6.5 %) performed best.
Colombia (-9.9 %), Turkey (-8.8 %), and Hungary (-8.1 %) did worst in the last three months.
In 2013, for the entire year, eleven emerging markets advanced and nine declined.
Poland was unchanged.
Greece (+44.5 %) — which only entered the MSCI Emerging Markets universe at the end of November 2013 — Egypt (+17.3 %) and South Africa (+15.8 %) performed best.
Peru (-29.8 %), Chile (-14.4 %) and Colombia (-13.8 %) fared worst last year.
There was no change in our performance ratings last quarter. The Top Value Model Portfolio contains the nine markets — Brazil, China, the Czech Republic, Hungary, Korea, Malaysia, Poland, Russia and Taiwan — at equal weights.
According to our performance ratings, an equally-weighted 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 and to the MSCI Developed Markets Index at the end of 2013, based on selected asset and earnings valuation measures:
Click on image to enlarge
Based on our valuation and return analyses, the emerging markets are now undervalued by 25 % versus the developed markets, while the Emerging Markets Top Value Model Portfolio is now undervalued by 19 % versus the MSCI Emerging Markets Index and by a whopping 40 % compared to the MSCI World Index of the developed markets. This bodes well with regard to potential outperformance of Emerging Markets in general and our Emerging Markets Top Value Model Portfolio in particular over the next three to five years.
Michael Keppler New York, January 17, 2014
Multi Currency Subscribers can see the full 49 page Keppler value analysis report including the neutral and poor value (sell) markets at the password protected multi currency site. Click here.
Profits for Self Publishers and Spanish Speakers.
The drop in Latin currencies will make these countries increasingly attractive and open opportunity for travel writers who want to travel and create niches there. Those who speak Spanish will gain the best advantages.
The small country effect will add huge opportunities in South America so we have added an additional Spanish course for March 28-28 and 30 2014. See below how to attend this three day course free.Gary