While emerging markets have been through a very tough time — down 40% peak-to-trough — the upshot is that EM stocks are “outstandingly cheap,” according to Morgan Stanley’s chief Asia and emerging market equity strategist, Jonathan Garner.
Speaking with CNBC’s Squawk Box Asia, Garner noted that “we’re at very distressed valuations, very oversold” in the emerging markets equities space before adding that “there are some signs already of healing in the leading edge of EM, i.e. in Korea and Taiwan.”
The Morgan Stanley executive added that EM equities can “begin to go up even while the S&P itself is flat or falling.”
Last week, Garner wrote in a note that EM stocks are close to bottoming out and shifted recommendations on EM stocks to overweight from equal weight. “A lot of wood has been chopped” and “it’s time to plant saplings for next cycle,” Garner wrote before adding that investors should “rotate towards proven early-cycle beneficiaries.”
Per Bloomberg, Morgan Stanley noted that South Korea and Taiwan are “highest conviction opportunities into a new cycle,” since those markets have significantly underperformed this year and the semiconductor inventory cycle is soon approaching a turning point.
Amid a strengthening dollar and strict COVID restrictions in China, EM stocks have had the longest losing streak from their recent peak in February 2021. The MSCI EM benchmark has so far dropped 26% this year. Morgan Stanley forecasts the benchmark to rally about 12% from now until June.
EMQQ Global has a suite of emerging markets exchange traded funds that provide exposure to the internet and e-commerce sectors within the developing world. These funds include the Emerging Markets Internet & Ecommerce ETF (EMQQ ), the Next Frontier Internet & Ecommerce ETF (FMQQ ), and the India Internet and Ecommerce ETF (INQQ ).
By focusing on the internet and e-commerce in emerging markets, EMQQ looks to capture the growth and innovation happening in some of the largest and fastest-growing populations in the world. More than 60% of EMQQ’s assets are weighted toward China.
FMQQ, meanwhile, seeks to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the Next Frontier Internet and Ecommerce Index (FMQQetf.com). While it has the same investment philosophy as EMQQ, FMQQ has no China-based holdings. Securities must meet a minimum of a $300 million market cap and pass a liquidity screen that requires a $1 million average daily turnover.
Launched in April, INQQ intends to capitalize on India’s rapidly growing digital and e-commerce sectors. INQQ seeks to provide investment results that, before fees and expenses, generally correspond to the price and yield performance of the India Internet and Ecommerce Index.
For more news, information, and strategy, visit our Emerging Markets Channel.