em exposure cyc v def 0314

EM Exposure Affects Cyclicals And Defensives Differently

Emerging market equities and European equities with EM exposure decoupled in 2011, with EM equities underperforming against the market and de-rating steadily, but in the last year the effect of different types of EM exposure have also diverged, pricing in a pessimistic view of EM growth that not everyone thinks is warranted.

“EM-exposed ‘cyclicals’ (broadly defined) are now starting to look attractive, with the Price/Book ratio at levels that have historically seen them outperform. They also look to be pricing in a sharp slowdown in emerging market growth, contrary to our economists’ expectations,” write Barclays analysts Dennis . . .


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