The emerging market sector just recently suspended for a thought with performance in the past 12 months besieged with the competition with the average investment company’s performance.
The long track record for the region still remains relatively impressed with the Global Emerging Markets investment company sector was at a remarkable 333 % over the past 10 years in share price total return terms.
With so many companies presently at a discount, now is a great time to take full advantage and invest for the long term. It begs us the question on what does the emerging markets think about the present market condition?
Season strong 4th quarter
As we approach the final months of the year, a constructive case can be inferred for the closer term outlook for emerging markets. Only once in the past ten years did emerging markets index declines in the fourth quarter and that was in relation to the financial downturn in 2008. Comfort can also be taken from the continuous accommodation in monetary policy in the western markets for longer than expected sentiments and valuation towards the asset class along with as much stronger economic date from the Chinese economy.
Emerging markets are definitely going through a dynamic transition from a period of high expectations for one of a more definitive and attractive valuations. With weaker currencies and negative sentiment everywhere we look, there is a possibility that there will be a better seasonal 4th quarter.
Full blown crisis is not likely
History doesn’t generally repeat itself but rather it does appear to reminisce certain aspects of it. While emerging markets might under perform for a time being a full blown crisis is not likely to happen and even if there is a standing crisis, it’s even considered to be a good opportunity for long term investors.
Hence, income investors and their dividends are a key focus for emerging markets being a better alternative than developed markets and if the trader is a long-term investor, the difference between a 5 % and 10 % compound over a decade is striking.
Remaining optimism in Asian markets
Asia has seen quite several weaknesses this year particularly several economies in the south and southeast Asia. On a positive note, there is corporate profit growth that still runs in Asia with a few exceptions being inflationary pressure having eased. Valuations are generally mixed but are presently 14x Price/earnings ratio for the portfolio is comfortably in the middle range trade during the last decade.
Possible room for development in emerging markets
Huge room for improvement is still possible in emerging markets. For instance, when people purchase cars, there is that pattern of increasing car ownership in emerging markets to increase as well. The only problem is that with traffic and air pollution bringing some Asian cities to a standstill, the rate of car ownership still remains relatively low. However, if you look at other markets, say for example in London over 5 decades ago smog and pollution brought the city to a halt yet at present it has far more cars on the road and smog is already curbed. Therefore, China will definitely adapt and automobile penetration will increase.