Pictured: Mathieu Caquineau, Morningstar's senior analyst for manager research
Emerging market optimism seems to have reached a consensus view, and the sentiment is reflected in index performance. Year-to-date, the MSCI Emerging Markets Index has climbed 17.3%, compared to 11.6% for the MSCI AC World Index and 9.7% for S&P 500.
Some asset management firms see the performance continuing despite macro factors. For example, the US interest rate hike earlier this week “does not make a material change to the outlook for either the US or emerging markets”, said Mark McFarland, Union Bancaire Privée’s Asia chief economist.
Grace Tam, senior market specialist at HSBC Global Asset Management, added that a “historically gradual Fed hiking path supports our overweight stance on EM assets.
“However, EM equities have rallied year-to-date, making the investment case more about economic and price momentum, alongside the upside offered by cheap currencies,” she continued.
EMs have proven to be an unruly bunch of countries to keep under one roof. The economies under this label are dragged in different directions by oil and commodity prices. Brazil and Russia, for example are negatively impacted by low oil prices while India, where the government subsidises oil imports, is among the EM economies that benefit.
In addition, “global emerging markets” is not really accurate. Asia makes up about 70% of the MSCI EM Index. Perhaps the rise of EM optimism is really a bet on the health of the heavyweight Asian EM economies – China, India and Indonesia.
Against this backdrop, Mathieu Caquineau, Paris-based Morningstar's senior analyst for manager research, provides a comparative analysis of the Comgest Growth Emerging Markets Fund and the Robeco Emerging Stars Equities Fund, which belong to the global emerging markets equity sector.