Schroders Emerging Markets Lens September 2024: your go-to guide to emerging markets
Emerging markets assets bounced back post the August volatility. We assess the valuation picture.
Autheurs
Our latest edition of the Schroders Emerging Markets Lens is now available.
Below is a summary of key developments in the equity and debt markets and you can find the links to both presentations here:
Emerging Markets Lens: Emerging Market Debt
Summary of emerging market equities:
- Emerging market (EM) equities bounced back following the market volatility in early August, and are up 7% YTD as at 6 September, underperforming developed markets (DM) which have advanced 13%.
- Underlying the EM vs DM comparison is a US vs China comparison. EM ex China is in line with World ex US (slide 4).
- Within EM, Latin America is the weakest region with FX depreciation a key drag amid US growth concerns and the carry trade unwind, as well as domestic policy concerns (slide 5).
- EM index performance has been concentrated YTD. The equal-weighted EM index is down over 1% and lags the market cap index by 9 percentage points (slide 17).
- Headline EM valuations are reasonable, and most EM are cheap versus their own history with larger markets skewing aggregate valuations. The valuation gap to DM is at its widest level in 20 years (slide 27).
- China and India index weights continue to converge amid contrasting valuations (slides 9-11).
Summary of emerging market debt:
EM bonds bounced back following the global market volatility in early August. YTD, hard currency debt continues to outperform local EM and US corporate debt; local debt lags due to currency weakness.
Hard currency emerging market debt (EMD):
- YTD performance continues to be underpinned by the high yield (HY) sub-sector, but the investment grade (IG) sub-sector has also generated a solid gain (slide 5).
- The hard currency index spread is slightly above its historical median; this is driven by the HY spread. The IG sub-index spread is below its historical median, partly linked to index compositional change (slide 12). EM corporate spreads remain below the historical median (slide 17).
Local currency EMD:
- The average real yield premium of EM over DM continues to tick up from long-term lows; most recently due to falling DM real yield. (slides 35-36).
- The average local EM ex Turkey yield curve is upward sloping (slide 34).
- EM fundamentals remain broadly firm with the average current account now close to balance. There are EM currencies which appear undervalued in all three EM regions, though the degree varies significantly (slide 40).
Charts of the month:
You can find the links to both presentations here:
Subscribe to our Insights
Visit our preference center, where you can choose which Schroders Insights you would like to receive.
Autheurs
Topics