Emerging markets as an investment destination:
Nordea: Overweighting Emerging Markets
AI investments are boosting the earnings of semiconductor companies in emerging markets.
In its May investment strategy, Nordea raised emerging markets to overweight. Asian technology companies now appear to be attractive investment targets due to their strong growth potential and moderate valuation multiples, says investment strategist Hertta Alava in Nordea’s weekly report.
“Even though the stock prices of semiconductor companies have risen so strongly that a setback is possible, we see the ongoing semiconductor cycle meeting the definition of even a supercycle. This supports the outlook for chip companies and may lead to an increase in valuation multiples, especially in Korea,” Alava states.
Megatrends Support Emerging Markets
According to Alava, there are other investment themes in emerging markets besides technology.
“Particularly in less developed countries, such as India, economic growth is driven by megatrends such as urbanization and the rising prosperity of the growing middle class.” According to Alava, industries such as automakers, construction, and consumer goods companies benefit from this development.
The growth in demand for raw materials benefits several Latin American countries.
According to Alava, earnings growth in emerging markets is expected to reach as high as 50 percent this year, thanks to semiconductor companies.
How Can You Invest in Emerging Markets?
The largest UCITS ETF investing in emerging markets is the iShares Core MSCI Emerging Markets IMI UCITS ETF (Acc), which seeks to track the MSCI Emerging Markets Investable Market (IMI) index. The MSCI Emerging Markets (IMI) index tracks emerging market stocks worldwide.
The fund’s Total Expense Ratio (TER) is 0.18 percent per year. The fund is the lowest-cost and largest ETF tracking the MSCI Emerging Markets Investable Market (IMI) index. The fund replicates the performance of the target index through full replication, meaning it buys all the stocks included in the index. Dividends are reinvested into the fund.
The iShares Core MSCI Emerging Markets IMI UCITS ETF (Acc) is a very large ETF with nearly 36 billion euros in assets under management.
Another large UCITS ETF investing in emerging markets is the Xtrackers MSCI Emerging Markets UCITS ETF 1C, which seeks to track the MSCI Emerging Markets index. The MSCI Emerging Markets index tracks emerging market stocks worldwide.
The fund’s Total Expense Ratio (TER) is 0.18 percent per year. The fund is the largest ETF tracking the MSCI Emerging Markets index. The fund replicates the performance of the target index using a sampling method, meaning it buys a selection of the index’s most significant stocks. Dividends are reinvested into the fund.
The Xtrackers MSCI Emerging Markets UCITS ETF 1C is also a very large ETF with 11 billion euros in assets under management.
A supercycle refers to an exceptionally long period of growth where the demand for a certain industry or commodity grows structurally beyond its long-term trend. A typical business cycle lasts from a few years to about ten years. A supercycle, on the other hand, extends over several decades.