Global markets were sent sharply lower which week, as fears of a trade war sent shockwaves across global financial markets.
Amid the turmoil, some market participants think emerging markets are a value play to consider. Ed Keon, chief investment strategist at QMA, said developing economies’ stocks are a not bad buy, even inside the midst of short-term headwinds.
Earlier which year, Keon took down some of his overweight position in U.S. equities, along with upped his exposure to emerging markets.
“After underperforming for several years in a row, along with having a decent year last year, emerging markets still look like pretty not bad values for us. So we are overweight emerging markets across our multi-asset portfolios,” Keon told CNBC’s “Trading Nation” on Friday.
Looking at classic metrics like cost-to-book ratios, along with trailing along with forward cost-earnings ratios, Keon said which emerging market equities present a better value at these levels than those inside the U.S.
One large emerging markets exchange-traded fund, the EEM, carries a forward cost-earnings ratio of 12.4; which compares to 16.5 on the S&P 500 Index. The EEM, comprised most heavily of Asian equities like Tencent, Samsung along with Alibaba, along with in 2017 posted its best year since 2009.
“Across the various metrics, emerging markets look cheaper. They always look cheaper compared to additional established markets, on raw measures,” Keon said.
“yet even adjusting for their normal discounts, I think you get better value, generally, in emerging markets than you do in developed currently,” he added, referring to the relative risk emerging economies sometimes carry relative to more established markets.
Keon contended which while the prospect of rising interest rates inside the U.S. stands to hurt emerging market equities inside the short-term, the broader issue is actually whether a global trade war will break out.
Just as in essentially every corner of the global equity market, Keon said, “there has been a fresh bout of uncertainty so far which year. yet I think when you net which all out, I think the story just for which year will be the great rise in earnings inside the United States along with global growth overall.
He added: “I think you’ll see which equities will end up having a pretty not bad year, yet clearly right currently there is actually a great deal of uncertainty inside the market.”