Emerging markets have seen explosive growth over the past decade, but with the recent contraction in the global economy, investors have a chance to look at real growth in individual markets. There is no doubt in my mind that the boom over the past couple of years in some countries were due to insatiable
investors overbuying in whatever country the talking heads mentioned. However, as the global economy worsened over 2008 and the first part of 2009, investors switched from the greed mentality and into a fearful and defensive position. Investors began pulling capital out of the emerging markets around the world, and what is left in these economies is real growth in GDP.
Investors now have a chance to analyze the fundamentals of the emerging markets and look for real potential value. Some of the markets stood up, while others folded to the economic pressure. MSCI Barra provides country specific indices based on equities listed by a specific country. The MSCI China Standard Core and the MSCI Brazil Standard Core have already doubled from their lows in October and November respectively. China is up almost 10 percent for the past year, but Brazil is down 13 percent over the same period. The MSCI India Standard Core is up almost 100 percent since its low in March of this year but is down almost 10 percent since August of last year. India has made it difficult for individual foreign investors to invest in Indian equity. Russia is struggling to recover as the MSCI Russia Standard Core is down almost 50 percent from this time last year.
As the market has started recovering over the past couple of months, many of these emerging markets are recovering quickly. Most of the emerging markets listed by MSCI are up 30 to 60 percent year to date, but hopefully investors will be weary of overbuying into emerging market funds just because it’s trendy. Hopefully, as a global society, we can stop to get our breath and think about building the economy back based on innovation, ingenuity, and real growth.