While caution should always be heeded, for those with a longer-term investment horizon, some bargains can be picked up at the moment, with EM sitting in “a historically cheap zone”, according to Austin Forey, manager of the JPMorgan Emerging Markets trust.
Matthew Siller, manager of the Baring Emerging Europe trust said in spite of his region being hit by the effects of US tapering and the geopolitical risks of Turkey and Russia, the improved corporate governance and earnings potential there have gone “largely unnoticed” and valuations remained the most attractively valued from across global equities, with good growth opportunities and strong income prospects.
Highest global dividends
“Dividend payout ratios have improved over the past couple of years thanks to management teams and majority owners employing more shareholder-friendly policies. While we believe there is room for further improvement, dividend yields now rank amongst the highest globally,” he added.
While the GEM asset class has suffered a massive sell-off of approximately $43bn (£26bn) so far this year, last week emerging market ETFs saw their first week of inflows since November, according to Dr Slim Feriani, CIO of Advance Emerging Capital.
He suggested the average EM discount relative to developed markets was back to levels last seen in 2004, which represented an “exceptional entry point for patient, long-term, contrarian investors.”
Dr Feriani, who also runs the Advance Developing Markets and Advance Frontier Markets investment trusts, reiterated the case for frontier markets, saying they were sitting at similar valuations to where the GEMs were 20 years ago.
