We've scrutinized a rising flow of positive investment directions toward MSCI Emerging Markets, which could outperform all over 2023. These directions are upcoming across big names, including Morgan Stanley, Lazard Asset Management, Bank of America, and others.
The world's big names are looking after Emerging markets after a continuous bear market for more than a couple of years and a start of recovery for China after ending the Zero COVID restrictions that have come alongside the Fed rate hikes cycle and weaker US Dollar. MSCI EM has risen around 20% since its lowest point in October 2022.
Lower energy prices support emerging countries with higher import bills for energy, diminishing the impact on sheets. According to Paul McNamara, investment director at GAM Investments, telling the financial times.
*source: MSCI Emerging Markets Index
Lisa Shallet, Chief Investment Officer Wealth Management at Morgan Stanley, pointed 3 Potential Catalysts for a Rebound in Emerging Markets. Read Lisa full article Click Here
A more pro-growth, stimulus-oriented stance in China
A peak in the strength of the U.S. dollar
Shifting global trade relationships
" The MSCI EM Index now trades at about 10 times forward earnings estimates, and the MSCI China Index about eight times. This is in marked contrast to the S&P 500 Index, which still boasts a forward price-to-earnings ratio of 17 and is over-owned by investors globally." According to Lisa Shallet article
David Hauner, strategist at Bank of America Securities, said to Financial Time on January 9, 2023, “There is increasing enthusiasm to pile into what could be a secular outperformance of EM over US assets,” he said. Read Full Article
*source: MSCI Emerging Markets Index
MSCI Egypt Index Performance
MSCI Egypt Index for the last month and 3 months beats the MSCI EM performance and trades at P/E 8.64 Vs. P/e 12.20 for MSCi EM Index.
That reflects the IMF loan approval and the Central Bank of Egypt's FX policy toward an exchange rate based on demand and supply. In addition, the rate hikes attracted foreign investors to Egypt's T-bills again.
*source: MSCI Emerging Markets Index
Investors Flow: aligns with the MSCI Egypt Index performance, as we can see starting January 2023 and until the 25th of January 2023, foreign institutions reduced their selling pace enormously to stand at EGP 150mn Vs. EGP 1.67bn during December 2022.
*source: EGVEST
Lazard Asset Management also updated its look for the emerging Markets during January 2023, sharing a positive outlook; they set several key drivers, which we will mention the Economic Growth here. (read Lazard Outlook on Emerging Markets)
Growth in the United States is widely expected to decelerate.
Growth in emerging markets overall should be relatively strong, evidenced by leading indicators that are increasingly pointing in their favor, such as manufacturing purchasing managers’ indices (Exhibit 2);
Energy rationing is projected to prolong the downturn in the European Union.
The United Kingdom continues to grapple with a deeper and longer-than-anticipated contraction. Relative to these advanced economies, emerging markets are starting to look more attractive.
We found another article at MarketWatch that highlights BlackRock Investment Institute's positive views regarding emerging markets; the article covers what BlackRock published previously on January 23, 2023, on its weekly market commentary.
"Yet we see near-term risks tilted against DM stocks, with earnings growth forecasts not fully reflecting the recessions ahead. So we're underweight tactically and prefer emerging market equities."
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