EMs Gaining Favor Among Investors

As the US stock markets are in a frothy mood, with the Dow Jones Industrial Average and the S&P 500 just off their new highs, one may think that the attention of fund managers and investment money is on the world’s largest economy.

That is, however, not the case, as emerging markets too have found favor among investors, with many markets and currencies enjoying buoyancy in recent months, the star online reported.

Stocks on Bursa Malaysia too have been recommended by big institutional houses, as opinion over the prospects for Malaysian equities turn positive.

In a CNBC report recently, Morgan Stanley initiated Malaysia’s stock market at “overweight”. It feels the upcoming general election will be a boost to the market and the increased spending on infrastructure will lift sentiment.

Private investments funded by China as part of the “One Belt, One Road” initiative will drive investments, as in 2016, China and Hong Kong made up 40% of Malaysia’s foreign direct investment. Malaysian corporate earnings are also poised for recovery, Morgan Stanley says, estimating that profit growth would improve 8% to 9% in 2017-2018 after three years of decline.

But it is not just Morgan Stanley that is now bullish on Malaysia. Some weeks back, Credit Suisse gave its reasons on why it was time to buy into Malaysia and the FBM KLCI has been up 0.62% since then.

During the first quarter, EM around the world saw positive activity in their stock markets and currencies.

According to global financial advisory Stout Risius Ross, EM economies with large foreign exchange reserves, low dollar-denominated debt, strong current account balances and solid public finances are likely to manage the aftershocks of a US Federal Reserve rate hike more effectively.

Argentina emerged as the best EM performer for the first quarter of the year, with its Argentina Merval Index registering a 19.8% gain, according to Bloomberg data.

This was followed by India’s Nifty 50 Index and the Philippines’ PSEi, which saw a 12.07% and 6.89% growth, respectively.

Franklin Templeton Investments executive chairman Mark Mobius also notes that EM currencies generally gained against the US dollar over the quarter, as waning confidence in the ability of the US government to stimulate growth or impose trade sanctions led investors to adopt a weaker view on the US dollar.

The Mexican peso, Russian ruble and South Korean won were among the top-performing currencies.