These ‘poor’ countries beat Wall Street with ease this year

Emerging markets are attracting more and more attention from investors. Not only are their stocks performing remarkably well this year, but the financial position of some countries is also stronger than expected. According to Erik Mauritz of De Beursfluisteraar, there is even reason to doubt whether countries such as the United States and France are still ahead in all areas.

The numbers speak for themselves. The MSCI Emerging Markets index, which tracks emerging market equities, rose 23.7 percent this year through the end of September. The global MSCI World index stalled at 12.1 percent. Both returns are measured in dollars.

Valuations are also more attractive. The expected price-to-earnings ratio of emerging markets is 9.7, compared to 17.9 for the MSCI World. Investors therefore pay significantly less on average for the same amount of expected company profit.

Nevertheless, the outlook differs greatly from country to country. Brazil is benefiting from political developments and higher commodity prices. Taiwan benefits from the growing demand for artificial intelligence thanks to chip manufacturer TSMC.

India is having a harder time. The economy is under pressure due to high oil prices. The Indian Nifty 50 index has already lost thirteen percent this year.

According to Mauritz, the development of public finances is even more remarkable. Several emerging economies have improved their fiscal policies and anti-inflation measures in recent years.

For example, South Africa's national debt amounts to about eighty percent of gross domestic product (GDP). In Brazil, that percentage is around ninety percent.

This is considerably lower than in the United States and France, where the national debt exceeds 110 percent.

The differences are also striking in the fight against inflation. The South African central bank missed its inflation target for six consecutive months. Nevertheless, Governor Lesetja Kganyago pointed out that US inflation has been above target for 67 months.

That doesn't mean emerging economies are more financially secure. Their interest rates tend to be higher and investors face greater political and currency risks.

According to Mauritz, emerging markets therefore deserve a greater role in diversified investment portfolios.

A simple way to invest in it is through a stock exchange fund (ETF) that tracks the MSCI Emerging Markets index.

The term ‘emerging markets’ was coined in 1981 by the Dutchman Antoine van Agtmael. Meanwhile, the economies within this group differ so much that the collective name does less and less justice to their development.