The global rotation towards ‘value’ stocks, from the growth stocks that many analytics houses see, it is especially beneficial to emerging market stocks, according to Bank of America analysts. This turn of the management companies “has only just begun”, they say, and will have a particularly positive impact on these countries that will also be exacerbated by the rise in the euro.
In other words, “the style rotation favors emerging markets as the cyclical asset class that benefits from the strong impulse of risk, “they explain. In a context of rebound in company profits from vaccination campaigns that will ease restrictions to contain Covid,” history shows that the titles of ‘value’, risk and small size they typically perform better, “they argue.
In addition, the investment bank maintains a “bullish outlook on emerging powers”, which is why it maintains this bet as one of the main ones for 2021. Thus, it identifies, by sectors, energy, public services, real estate market and construction sector, as those where the bias towards consolidated companies and with high dividends is more marked. These experts also distinguish two countries that stand out from the rest: Russia and Turkey.
Faced with this trend, they explain that company valuations ‘growth’ of developing countries are near historic lows. Instead, “the current state of the economic cycle suggests that ‘value’ stocks have yet to catch up with the expected improvement in PMI purchasing managers’ indices. As if that weren’t enough,” the higher yield on PMI bonds The US and the strength of the euro are additional catalysts for these types of companies to excel. “
In this new scenario, however, they emphasize the importance of investors differentiate between “the opportunities and the traps” presented by consolidated companies. And based on a comprehensive analysis of 220 developing powerhouse stocks, Bank of America isolates “eight ‘value’ bets, which will stand out given their fundamental appeal and two pitfalls.”
Although Russia and Turkey stand out among its selection of countries, South Africa is the nation that places three companies in this ‘top eight’. Is about Sappi, Exxaro and MNT. Russia, for its part, has two: Detsky Mir and Lukoil, while in Turkey they select Garanti Bank and CCI. The Austrian bank closes the list Raiffeisen Bank.
As for the traps, it is the South African telecommunications company Telkom SA and the polish PKN Orlen. These companies “will be underperforming” next year.