Wednesday, June 21, 2006

Weighing the odds of emerging market outperformance

Well, as sports fans here know, I'm a big fan of many emerging markets, mainly because I consider them to be cheap. For that, you get a good growth profile, better than ever ROEs and current account surpluses - all good stuff. Having said that, all emerging markets are not alike.

A recent UBS report makes many of these same points, suggesting that they offer a good investment profile. As to whether the market continues its' emotional response in the face of further inflationary pressures, or some sort of crisis, is yet to be determined. I suspect that will be the case: in other words, EM market volatility will continue for awhile. I personally hope to profit on this volatility: that in the next plunge, these values will discount at a higher beta than the S&P500.

Yet, the UBS report makes the case that many offer good value, particularly my personal favorite, South Korea.

I suspect that one day off in the not too too distant future (timing, as always Stella, remains the question), the US market and EM market will finally disconnect, with the EM market finally being accorded more respect and lower volatility.

May I suggest you peruse the report?


The Confused Capitalist

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