Emerging markets have long held promise and potential, but the returns offered by equities don’t always match economic growth, frustrating investors along the way.
However, analysts have been upwardly revising earnings estimates on emerging-market companies faster than for those in developed countries. These factors could be signs that investors may want to deploy active management when allocating to developing economies.
“American investors are intrigued by emerging-markets stocks,” writes John Rekenthaler for Morningstar. “The reason for it is their economic prospects. The Asian Tigers of Hong Kong, Singapore, South Korea, and Taiwan have enjoyed remarkable development, to the point where many no longer consider those nations to be emerging. Attention has now turned to their successors: Brazil, Russia, India, China, and South Africa.”
The emerging market space has attracted the attention of some big money managers. For example, Ashmore Group Plc, JPMorgan Chase & Co. and UBS Group AG have all been supporting a bullish case for emerging-market equities so far in 2021, predicting the category to be a prime beneficiary of the post-coronavirus economic recovery process.