Asia loses its luster in EM scorecard

BANGKOK/ SINGAPORE/ HONG KONG — By some measures, Mexico and Turkey come out as the most attractive emerging markets (EM) for 2018.

In a Bloomberg analysis based on a range of metrics including growth, yields, current-account position and asset valuations, the two countries score highest among 20 developing economies.

Asian economies occupy the five lowest- scoring positions, including the Philippines which placed 17th, just behind Thailand ( 16th) and ahead of Indonesia ( 18th), China ( 19th) and India (20th).

Mexico and Turkey scored higher because their real effective exchange rates are more competi- tive than the average of the past 10 years, according to the analysis.

India and China’s valuations are relatively expensive in historical terms.

Their economic growth is unlikely to be as fast as it has been in the past decade, according to estimates.

“If you are on the hunt for something to buy now, Turkey and Mexico stand out because they are relatively cheap,” said Takeshi Yokouchi, a senior fund manager in Tokyo at Daiwa SB Investments Ltd., which oversees the equivalent of $ 50 billion in assets.

“When political risks ease up, that’s when you want to make an

entry, given their solid fundamentals and high yield.”

Turkey’s five-year government bond yields about 13%, while Mexico’s yields 7.5%. Both exceed India’s equivalent rate of about 7.3%, which is the highest among Asian nations covered by the analysis. China’s yields 3.9%.

The study covers 20 of the 24 markets making up MSCI Inc.’s Emerging-Market Index.

Greece is excluded owing to its use of the euro, while Egypt, Qatar and Pakistan are excluded because of data limitations.

The result for each is shown as a Z-score, which measures the relationship of the individual value to the 10-year average.

“Asian countries do look relatively expensive as they have been bought amid strong fundamentals in the region,” Mr. Yokouchi said. “They may not have the potential like Turkey or Mexico to rally big, but Asian currencies and assets are also likely to stay steady from here.”

The Turkish lira is the worstperforming currency against the dollar in the past six months, partly due to lingering political tension with the United States.

The Mexican peso ranked second worst amid the ongoing negotiations on the North American Free Trade Agreement.

The MSCI Emerging-Market Index of shares has rallied 79% since bottoming two years ago, outperforming the developedmarket gauge’s 47% advance during the period. — Bloomberg