Like true love, cricket and – depending on your taste in music – a Kraftwerk box-set, emerging market (EM) equities, on a long-term investment horizon, are a gift that just keeps on giving. In 2012, the fourth full calendar year since the onset of the financial crisis, this love story stayed on script. While developed-market stocks rose, emerging-market securities soared, handing investors a return of nearly 19% in US dollar terms, based on the MSCI EM Index.
With a few exceptions – notably Brazil, which handed investors a paltry country-weighted return of less than 1% – 2012 was another crackerjack year for the growth-fuelled emerging world.
On a regional basis, returns from emerging Asia stocks – which make up 60% of the index’s market cap – topped 20%, as did equities from emerging Europe, Middle East and Africa (EMEA), according to Thomson Datastream.
Thanks to massive underperformance in 2011 – amid the despair of the eurozone crisis – EMs under-performed their developed peers in the risk-off environment, creating big pockets of value in 2012.
Turkey, for example, which makes up just 1.7% of the MSCI EM Equity Index, delivered returns of more than 60% last year.
