Singapore: Mexico and Turkey are showing themselves to be the most attractive emerging markets in 2018 based on a range of metrics including growth, yields, current-account position and asset valuations analysed by Bloomberg. By contrast, Asian economies were among the five least attractive.
Mexico and Turkey scored higher as their real effective exchange rates are competitive compared with the average of the past 10 years, according to the analysis. For India and China, their valuations are relatively expensive in historical terms. Their economic growth is unlikely to be as fast as it has been in the past 10 years, economist estimates show.
“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 yield is about 13 per cent, while Mexico’s is 7.5 per cent. Both exceed India’s equivalent rate of around 7.3 per cent, which is the highest among Asian nations covered by the analysis, while China yields about 3.9 per cent.
The study covers 20 of the 24 markets making up MSCI Inc.’s Emerging-Market Index. Greece, Egypt, Qatar and Pakistan are excluded owing to its use of the euro for Greece and because of data limitations for the other three countries. 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,” Yokouchi said. “They may not have potentials 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 worst-performing currency against the dollar in the past six months, among the countries included in the analysis, due to lingering political tension with the US. The Mexican peso ranked the second worst amid ongoing Nafta negotiations.
