Emerging markets are popular for their rapid gross domestic product (GDP) growth. Thus, it has long become the prime market of growth-oriented investors. However, since growth investing slows around the globe in 2019, there are opportunities for the appearance of value investing in the emerging market.
Value Investing’s benefits
Basically, value investing has gained increasing popularity in developed and developing markets. There is various evidence of superior returns come from investing in stocks with above-average dividend yields, or below-average price-earnings or price-book ratios.
A paper from Emerging Market Review 2002 brings the tendency that value stocks are bringing a higher return than non-value stocks.
Many investors in emerging markets put their interest in value stocks for its risk profile. For them, purchasing equity at discount will give less potential loss than big stock with few earnings or assets.
Investors become more interested in value investing since there is evidence that proofs high growth stock to being as volatile as value stocks. Thus, investors do not assume more risks from value stocks, anymore.
Value investing in emerging markets
There are various ways to value investors to get exposed to emerging markets. They can start from individual stocks, exchange-traded funds or mutual funds.
From those three, international ETFs are the most cost-effective and easiest way to gain exposure in emerging markets. They give an entire portfolio in a single security, most of the time with lower expenses.
There are many emerging markets ETFs, but only some of them give value investing opportunities. Here are some of the most popular emerging market value ETFs.
- FlexShares Morningstar Emerging Markets Factor Tilt (TLTE)
- WisdomTree Emerging Markets High Dividend (DEM)
- iShares MSCI Emerging Markets Minimum Volatility (EEMV)
- SPDR S&P Emerging Markets Dividend (EDIV)
For mutual funds, most of them are more expensive than ETFs. The reason for that is most of them actively manage funds. Thus, investors need to consider these fees different before they choose mutual funds in emerging markets.
Here are some of the most popular mutual funds in emerging markets.
- T. Rowe Price Emerging Markets Value Stock Fund (PRIJX)
- Brandes Emerging Markets Value Fund (BEMIX)
