"After the tailspin of 2013, emerging markets are now looking cheap, says Mark Mobius, Templeton Emerging Markets executive chairman. He tells the FT's Josh Noble that tapering has been fully priced in and that far from being another bad year, 2014 should see outperformance by the sector."
Thoughts? SPY has been outperforming EEM since the end of 2010. But if you look back 11 years, you can see that the U.S. market is just catching up with the emerging markets (with help from the Fed). EEM is about to make a big decision on its chart.
Here are Mark Mobius' thoughts on China via Barron's:
Q: What kind of GDP growth and earnings growth do you expect in China next year?
A: Seven percent [economic] growth. As a general rule, you can double the economic number to get a number for earnings growth. For China, we're looking at least 14% earnings growth.
Q: What do you think of stock valuations in the Chinese market?
A: Equity valuations overall are not much above their 2008 lows, and we believe that many of China's A-shares are attractively priced. The A-share market … gives an investor more opportunities to invest in smaller companies and sectors. such as tourism, pharmaceuticals, consumer and biotechnology [versus] H-shares or red chips.
I think Michael Pettis, author of the China Financial Markets blog, has a very interesting view on China's rebalancing. He's thinks China's economic reforms (its shift away from investment spending) will cause China's GDP growth to "drop sharply."
Here are charts courtesy of StockCharts.com.
SPY vs. EEM since 2003
There's a big move coming for EEM. I hope Mr. Mobius is watching this chart.