Emerging Markets Outlook - A Focus on Valuation

02 March 2022

2022 started with challenges for most markets. The developed markets (DM) index, MSCI World, finished January down -5.3% – the worst start to a year since 2016 – led by declines of -5.4% for the S&P 500 and -8.5% for the NASDAQ index. A further example of the flight away from risk, Bitcoin declined -17% and is now some -43% below its November 2021 peak.

Amidst this backdrop, the most resilient major equity index was MSCI Emerging Markets, which declined just -1.9% for the month in US dollars and finishing up +1.06% for the month in Australian dollars. Indeed, there are several compelling reasons to think that emerging markets stocks may continue to outperform their developed markets (DM) peers.

Emerging markets currently offer attractive valuations which have the potential to underpin robust long-term returns. However, the composition and characteristics of the EM index mean that a selective, high conviction approach focused on “quality at a reasonable price” will continue to provide much greater opportunities.

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Northcape Capital

Northcape Capital
Expert Investment Partner