official once remarked to Buttonwood that his country’s economy does best when the rest of the world does well—but not too well. India’s exports benefit from global growth. But when the world economy gains too much momentum, interest rates and oil prices can rise uncomfortably high, hobbling a country that is a net importer of both capital and crude.
Another spur to India’s stockmarket—and to emerging-market equities more broadly—was America’s election. The result, when it emerged at last, removed one lingering source of uncertainty. That has made room in investors’ stomachs for other types of risk. The renewed appetite for edginess helped lift’s benchmark emerging-market equity index by over 6% from November 3rd to 9th. It is now up by more than half from its lowest point in March.
That underperformance, however, leaves emerging-market stocks looking much better value than their rich-world counterparts. According to Oxford Economics, a consultancy, the ratio of price to earnings, adjusted for the cycle, for emerging markets lies in the bottom half of its historical distribution. America’s ratio, by contrast, is above the 98th percentile.
They also think that the most beleaguered emerging markets might benefit from a rotation within the rotation. John Lomax of, for example, recommends increasing holdings of countries like Brazil and South Africa at the expense of Asian ones, like Taiwan.
95% only bad news(