Developed Markets are only more profitable in terms of ROE than Emerging Markets because of the US. Looking at Developed non-US the ROE becomes 9.4% (instead of 11.8%) versus Emerging Markets at 10.8%. Asia is the most profitable region among Emerging Markets.
Besides Japan, companies in Developed Markets pay out more of their profits to shareholders relative to Emerging Markets. Developed Europe has the highest dividend payout ratio.
US increases the valuation of Developed Markets. Excluding US, Developed Markets trade closer to Emerging Markets on price-to-book. Taking ROE into account, we then can see that Emerging Markets are more attractive than Developed non-US.
Even though the US has higher ROE, it’s less attractive on ROE/PB relative to both Emerging Markets and Developed non-US. Most ROE for the price-to-book you pay, you’ll get in Emerging Europe.
Consensus expect earnings growth to be slow in 2016 more or less across the board. The two standing out is Latin America that is expected to rebound, and Japan where earnings are expected to grow by 9.2%.
In the past 2W Emerging Markets have returned 2.5% versus Developed Markets at 0.3%. Asia (Emerging and Developed) and Latin America has shown the strongest price performance.
US has the highest net debt-to-equity in Developed Markets, and Latin America has the highest in Emerging Markets.
Price volatility in the past 3M has been slightly higher in Developed markets; driven by volatility in Japan and Europe. US and Emerging Asia have had the lowest volatility.
Get the Global Equity FVMR Snapshot for free, sign up below and get it to your inbox every Monday.
NOTE: You’ll have to fill in the form below to receive the Global Equity FVMR Snapshot even if you’re already subscribing to other FVMR Snapshots and/or a founding member that get our newsletter.
DISCLAIMER: This content is for information purposes only. It is not intended to be investment advice. Readers should not consider statements made by the author(s) as formal recommendations and should consult their financial advisor before making any investment decisions. While the information provided is believed to be accurate, it may include errors or inaccuracies. The author(s) cannot be held liable for any actions taken as a result of reading this article.