According to Patrick Moonen, principal strategist multi-asset at NN Investment Partners, Chinese data of the past week confirm that growth is holding up reasonably well and that capital flows have been manageable.
“Knowing that emerging market financial conditions have eased substantially in recent months, we should expect more improvements in emerging market growth in the coming period,” he said.
Another factor is the rise in emerging market earnings momentum, noted Moonen. This, said the strategist, is now stronger than the momentum in developed markets and has turned positive for the first time in at least two years.
Moonen also highlighted that inflows are accelerating to the asset class due to the relative risk decreasing in emerging markets. “In addition, given the rise in political/macro risks in developed markets, the relative risk profile of emerging markets has improved. These elements have an impact on the appetite for emerging market assets,” said Moonen.
“A final factor is linked to valuations. These did not matter a lot as long as fundamentals were not improving but given these are improving, the valuation discount on price to earnings and price to book becomes relevant again. The region also offers a 3.2% dividend yield, above the market average for developed markets,” he added.
