After such a remarkable run it should not be surprising that analysts are taking a closer look at emerging market equities and wondering whether their run might be over. A while back we looked at the issue of whether the emerging markets run might be extended given the closing valuation gap with developed market equities. A number of items on this issue have come to light.
Random Roger points to an article that looks to a cooling off in the emerging markets. Roger believes investors should look to the higher dividend yield portion of the market.
Jay Walker at the Confused Capitalist takes a closer look at the valuation ratios for the emerging markets. In conclusion he finds reasonable valuations, but cautions investors to be diversified.
Lisa Scherzer at SmartMoney.com interviews one of the more distinguished emerging market equity fund managers, John Chisolm at Acadian Asset Management. He seems to dampening the high expectations some investors may have for the asset class.
SM: But surely emerging markets aren’t done “emerging.” Aren’t some countries just getting started with real economic growth?
JC: We don’t think the party is completely over. Now emerging markets are more fairly valued relative to developed markets, so I think they’ll be less attractive over the next five years than they were in the past five years. There are still decent prospects within emerging markets. We wouldn’t advocate getting out of them completely. We just don’t think you’re going to see the same kind of performance you’ve seen coming out of them in the past five years.
If you are a regular portfolio rebalancer then you would be taking money off the table in the emerging markets given their outperformance. At the very least investors should probably cool their expectations for further emerging markets outperformance.