Templeton, BlackRock Say Now's the Time to Buy Emerging Markets


(Bloomberg.com, 2018) Emerging markets are poised to rally after more than $7 trillion in stocks slid into bear territory, according to three of the world’s largest money managers.

Strategists and investors from Goldman Sachs Group Inc., Franklin Templeton Investments and BlackRock Inc. say cheap prices, rising corporate profits and strong fundamentals will outweigh risks from a tit-for-tat trade war, rising interest rates and potential U.S. recession.

"We do like EM assets, particularly EM equities," said Isabelle Mateos y Lago, chief multi-asset strategist at BlackRock Investment Institute, the asset manager’s think tank. "It’s a combination of the global growth backdrop, earnings expectations for emerging-market corporations and valuations."

Yet bulls are in the minority. More than half of market participants expect the selloff in developing-nation stocks and currencies to continue, according to a Bloomberg survey of 20 investors, traders and strategists. Pessimism towards developing-nation stocks is close to the highest level in 23 years, according to the Bank of America Merrill Lynch Risk-Love indicator.

BofAML strategists including Ritesh Samadhiya said that’s "normally a sign to increase exposure, not reduce it," as long as it doesn’t coincide with a recession. And recent headwinds such as trade tensions and a stronger dollar shouldn’t derail stocks much longer, according to Franklin Templeton.

Here are six charts that support emerging-market bulls

The performance of emerging-market equities relative to U.S. large caps, as measured by the spread of rolling three-month returns, is near a threshold of -17 percent, which hasn’t been breached since the global financial crisis.

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  • While calling the bottom is never easy, developing-nation stocks have rallied an average of 32 percent in the 12 months after their deepest drawdown of the year, according to data compiled by SunTrust Private Wealth

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