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GEM Equity Strategy: Cherry Picking Countries and Sectors

First edition of our global emerging markets (GEM) equity strategy product

Welcome to the first edition of our global emerging markets (GEM) equity strategy product.

We have explored consensus forecasts on Bloomberg for the 3 main EM regions, 10 industry sectors and 23 countries in order to identify key investment themes (out of a total of 151 country sectors) for the remainder of this year. We also analyzed currency performance, fund flows, and momentum indicators to come up with 4 key investment themes:

  • Buy Russian equities
  • Buy Asian Financials ex-China
  • Sell Latam Consumer discretionary
  • Switch GEM telecoms for GEM Utilities

Our risk monitor is showing a mix of risk averse data in the short term with risk taking indicators in the longer term, and no clear preference between EM and DM. Overall, they reflect a correct risk/reward balance, thus this report’s suggestion to ‘cherry pick’ countries and sectors.

Throughout this report, we explain what’s behind our methodology and also present our case for emerging markets as an unavoidable asset class. We discuss currency outlook for the next few months and how that fits with investment ideas.

We have constructed a monitor for fund flows and a risk assessment tool for global markets. Finally, we present a brief overview of BESI’s coverage in 3 main markets: Brazil, India and CE-3 (Poland, Czech Republic and Hungary). However, given that our methodology is based on consensus numbers and mostly quantitative (as opposed to our fundamental equity research teams in selected geographies), we conclude the report before recommending stocks. Please take into consideration that our views may differ from analysts’ bottom-up views, and focus rather on identifying countries/sectors that could offer positive returns on an absolute basis.