Emerging markets rallied on in January following the US Federal Reserve not increasing interest rates and the likelihood of a US and China trade deal to conclude in the next few weeks. Numerous emerging market ETFs
throughout February and the markets are only going to improve, according to Franklin Templeton.
Several factors could lead to further confidence in emerging markets such as economic growth differentials between emerging and developed markets favouring the emerging markets and EM currencies are seemingly undervalued. Franklin Templeton also says ongoing reforms and undemanding valuations will also contribute to emerging markets continued growth.
Within Asia, Pakistan, South Korea and China all rebounded from a difficult Q4 2018. While South Korea's benchmark index improved in the first few weeks of the year, India, which is said be one of the leading economies in EMs, faced a number of stocks decline ahead of the country's general election.
Comparing the return year-to-date of the iShares MSCI China UCITS ETF (IASH) and the iShares MSCI India UCITS ETF (IIND), the values appears to be diverging. The IASH is already producing returns in excess of 12% for the year whereas the IIND has faced loses close to 5% for the same period.
Brazil, Colombia and Chile were the leading performers in Latin America, according to Franklin Templeton. Brazil's new president Jair Bolsonaro has made the country's economy and priority of his to develop and has seen a bullish performance.
At the region's other end of the ladder, Peru and Mexico have been producing positive returns but have been very minimal. This has been due to concerns over fuel shortages and has resulted in the government intervening to prevent fuel and gas theft.
The iShares MSCI EM Latin America UCITS ETF (above) shows how well the Latin American emerging market has performed this year. Returns ballooning to 8% in the first few days of January have steadily increased for the following weeks.