BCA Research has published the following daily note about the relative strength of Emerging Markets versus G7 equity markets.
Our Emerging Markets Strategy service remains bullish on many emerging stock markets in Asia and Latin America relative to their G7 counterparts.
Emerging market equities bottomed late October and did not break to new lows in March along with U.S. and European indexes. Consequently, emerging market relative performance has been spectacular. Heading forward, there is still risk that renewed weakness in the global equity benchmark will weigh on emerging market stocks. Still, in relative terms, we expect outperformance to persist throughout this year. This is consistent with our bias that the current problems in the developing world are cyclical in nature, not structural as is the case in the U.S. and U.K. Bottom line: A correction in global equities would be a drag on emerging market share prices in absolute terms. However, the relative outlook remains appealing and investors should continue to overweight emerging markets in a global equity portfolio.
