In­vestors ex­pect fur­ther rise in emerg­ing mar­ket eq­ui­ties

The Star Early Edition - - BUSINESS REPORT - Sinead Carew

EVEN though a steady stream of money has flowed out of US stocks into over­seas mar­kets, in­vestors ex­pect Euro­pean and emerg­ing mar­ket eq­ui­ties to rise fur­ther, sup­ported by ex­pec­ta­tions for eco­nomic growth and ac­com­moda­tive cen­tral bank poli­cies.

US fund in­vestors put the most money into over­seas eq­ui­ties since the sec­ond quar­ter in 2015, with more than half of the $90 bil­lion (R1.17 tril­lion) out­flows for the first half com­ing in the sec­ond quar­ter, ac­cord­ing to pre­lim­i­nary Lip­per data.

The MSCI Emerg­ing mar­ket in­dex has risen 17 per­cent in the year-to-date com­pared with a 4.9 per­cent rise for Europe’s Stoxx 600 in­dex and the S&P 500 in­dex’s 8 per­cent gain.

Since emerg­ing mar­ket cen­tral banks have been low­er­ing in­ter­est rates and their cur­ren­cies had been fall­ing in re­cent years this was now help­ing to boost eco­nomic growth, ac­cord­ing to North­west­ern Mu­tual’s Chief In­vest­ment Strate­gist, Brent Schutte.

But still the emerg­ing mar­ket in­dex is roughly 25 per­cent off its all-time high reached in 2007 while the Stoxx 600 is 8 per­cent off its record high. In com­par­i­son the S&P 500 is just 1 per­cent be­low its lat­est record, reached last month.

Record highs

The over­seas in­dexes could reach new record highs over the next two years, ac­cord­ing to Jack Ablin, chief in­vest­ment of­fi­cer at BMO Pri­vate Bank in Chicago cit­ing im­prov­ing growth.

“Fi­nally the re­cov­ery has re­ally picked up in the rest of the world. It’s mov­ing along faster than the US, be­cause it’s trailed. The US is fur­ther along, be­cause the cen­tral bank here re­ally was ag­gres­sive in quan­ti­ta­tive eas­ing first,” said Ablin.

For the sec­ond quar­ter, rev­enue for com­pa­nies in Euro­pean mar­kets are ex­pected to grow 5.8 per­cent com­pared with 4.6 per­cent for S&P 500 in­dex com­pa­nies and 11.5 per­cent for emerg­ing mar­kets in the Asia Pa­cific Re­gion, ac­cord­ing to data.

Earn­ings es­ti­mates for Euro­pean com­pa­nies for the pe­riod stand out with a 13.5 per­cent jump seen com­pared with 8 per­cent growth ex­pected for the S&P 500 and 6.4 per­cent for emerg­ing mar­kets.

Newspapers in English

Newspapers from South Africa

© PressReader. All rights reserved.