Emerging Market Due Diligence

As mentioned in the introduction to the Group, it seems the argument for EM Equity investing has migrated to one of Diversification to one of capturing   Economic Growth. 

We have for some years head the stories how Fx. China is massaging growth numbers, and investing into meaningless Infrastructure project to bump headline GDP numbers. 

We know that not all Growth is Profitable Growth. 

Vanguard has however published a paper that highlight that it is actually more the entry valuation level, rather than change in GDP that tend to determine total return ex. ante.

In that light it is important that one keeps track on the time-varying levels, direction and momentum of whatever multiple one use to gage valuation.

Valuable discussion in this group could therefore be around:

A. Top-down Country ranking mechanism that seek to filter those countries out with Vanity Growth numbers, and instead highlight Countries with a sustainable profitable economic growth.

B. Prudent valuation multiple like E/P to gage valuation

A visualization comparing Emerging Countries multiples will be implemented if users express an interest.

 

like0