Eastspring's Cormie: Normalising rates and global growth positive for GEM equities

Overheated global economic recovery a risk

Over the past two years, GEM equity markets have performed very well at a headline level.

However, we saw huge dispersion in stock level performance in 2017 as investors chased small pockets of popular growth stocks while paying little attention to the price they were paying.  Similarly, we have seen quality stocks outperform for the last few years as defensively inclined investors have persistently over-paid for the comfort of near-term earnings certainty and income. While the GEM equity market rally has taken headline valuations above their long-term average, GEM equities still look very cheap relative to developed markets. Within GEM equities, we see a significant va...