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HONORS ESSAY
AN ANALYSIS OF EMERGING MARKETS
An in-depth look on the current status of emerging markets through the analysis of diversified emerging
market equity mutual funds.
Andre Waldron5/3/2011
Submitted in partial fulfillment of the requirements for the degree of Bachelors in Business Administration in Finance at Hofstra
University:
Advisor:
Dr Rahul Bishnoi.
INTRODUCTION
Emerging Markets have played a significant role in the financial world for a considerable
time period. The term “emerging markets” was first coined in 1981 by a former World Bank
employee named Antoine W. Van Agtmael. (Bennett) Emerging Markets can be widely
interpreted. An emerging market economy can be defined as an economy with a per capita
income in the low to medium range. (Heakel) Emerging market nations are characterized by
speedy economic progression and/or a passage of noteworthy monetary reforms. (Heakel)
Emerging markets can be characterized by increased foreign direct investment inflows, a
booming middle class and increased consumer spending. (Heakel) Typically, emerging market
countries face a heightened amount of economic exposure and political risk. (Heakel) Emerging
market equity mutual Funds have had similar expansion and success as the emerging market
sector itself. Thus, it is possible that the major factors and components of emerging markets can
be seen through an in-depth analysis of emerging market equity mutual funds. In this essay, I
will provide a thorough examination of the current condition of emerging markets through my
analysis of emerging market equity mutual funds. First, I will identify the emerging market
locations in which investment managers primarily allocate their assets and explain why this is the
case. I will also examine the investment strategies and approaches used by emerging market
equity funds. I will also identify key mutual fund equity holdings that are currently driving
emerging market mutual fund performance. In addition, I measured the risk indicators and risk
vs. return indicators of mutual fund portfolios to find out whether emerging market risk was
worth the return. I used price-multiple analysis of various emerging mutual fund portfolios to
determine whether emerging markets are undervalued or overvalued. In addition, I highlighted
the current emerging markets issues discussed by investment managers in their quarterly
commentaries. Finally, I will provide my own viewpoint on the current status of emerging
markets.
All emerging market equity mutual funds that I analyzed were from the “diversified
emerging markets” mutual fund category. In this category, investment managers can invest in
equities from a wider variety of emerging market nations. These mutual funds are not nearly as
concentrated as BRIC mutual funds or emerging market funds that point their investments
towards a particular region or market sector. It is clear that diversified emerging market equity
mutual funds can provide the most accurate representation of emerging market conditions due to
the wide variety of emerging market nations that are represented in each mutual fund.
I. BRAZIL
It is clear that diversified emerging market equity mutual fund managers have pointed their
investments in the direction of Brazil. In most of the mutual funds that I examined, Brazil tool
up the largest percentage of a particular fund’s country allocation. According to a study done by
Citywire Analysis, Brazil has been the nation of choice for some of the best emerging market
investment managers over the past five years. (Simpson) In recent years, Brazil has gained an
elite status as a nation with tremendous economic growth and an abundance of investment
opportunity. With Brazil set to be the host nation of the 2014 World Cup and the 2016 Olympic
Games, it is clear that they have the world’s attention as an economic power. I will attempt to
demonstrate the growth of Brazil through the measurement of key indicators. Brazil’s economic
growth can be seen through a nation’s gross domestic product. Exhibit 1 illustrates Brazil’s GDP
progression in terms of its national currency. Exhibit 2 demonstrates Brazil’s GDP progression
in terms of its growth percentage.
2005 2006 2007 2008 2009 2010-500,000.000.00
500,000.001,000,000.001,500,000.002,000,000.002,500,000.003,000,000.003,500,000.004,000,000.00
(Brazil) GDP National Currency (millions)
GDP = (national currency mil-lions)
(Brazil) GDP
Source:Euromonitor Passport
(Exhibit 1)
2005 2006 2007 2008 2009 2010-1012345678
(Brazil) GDP % Growth
(Brazil) GDP
Source:Euromonitor Passport
(Exhibit 2)
Through these two GDP measures, one can clearly see the gradual evolution of the
Brazilian economy. As seen in Exhibit 2, Brazil’s GDP percentage growth hit its highest point
in 2010 following decline in 2008 & 2009 via the recession. (Brazil: Country Profile) Brazil’s
high GDP Growth Rate in 2010 was buoyed by a wave of investment and consumer spending.
(Brazil: Country Profile) The data on the graphs clearly reveals an economy that has come into
its own over time. Another strong indicator of Brazil’s economic growth lies in its exports and
its trade balance surplus. Some of their main exports include iron ore, iron, petroleum and other
raw materials. (Brazil: Country Profile) As of March 2011, Brazil has nearly $200 billion in
total exports and a $20 billion dollar trade balance surplus. (U.S Department of State) Exhibit 3
displays Brazil’s power as an export nation. (Brazil: Country Profile)
2005 2006 2007 2008 2009 201050,000.00
100,000.00
150,000.00
200,000.00
250,000.00
BRAZIL EXPORTS in ($) U.S Mil-lions
EXPORTS
Source: Eu-romonitor Pass-port
(Exhibit 3)
Foreign Direct Investment has been a main driver for the emerging market of Brazil. It is
essential for one to have an idea of the entire scope of FDI as well as the underlying reasons.
Exhibit 4 shows Brazil’s total foreign direct investment inflows in U.S dollars. (Unctadstat)
19992000
20012002
20032004
20052006
20072008
20090
1000020000300004000050000
Brazilian FDI Inflows (US dollar terms)
Year
Mill
ions Source =
UNCTAD-STAT
(Exhibit 4)
It is clear that Brazil is highly dependent on foreign direct investments from the Euro
Zone. According to the Vienna Institute for International Economic Studies, there were a
total of 1279 foreign investment projects in Brazil between 2003 and 2009. (Hunya, and
Stollinger) 548 of those foreign investment projects stemmed from nations in the EURO 15.
(Hunya, and Stollinger) One of the overarching reasons for investment cited by firms was the
potential for growth in Brazil’s domestic market. (Hunya, and Stollinger) However, China
has become a major investor in FDI inflows within Brazil. In the first half of 2010, China
invested 20 billion dollars of FDI inflows in Brazil. (Hunya, and Stollinger) China was
motivated to invest in key natural resources that Brazil possessed. (Hunya, and Stollinger)
China invested heavily in ongoing development projects in Brazil that is aimed to boost the
nation’s weak infrastructure. (Hunya, and Stollinger) In addition, China purchased huge
investments in Brazil’s electric power grid. (Hunya, and Stollinger) China also plans to
expand their agricultural base using Brazil’s land. (Hunya, and Stollinger) Other countries
have invested 30 billion dollars in FDI inflows in 2010. (Brazil: Country Profile) When one
considers the positive signs in the Brazilian domestic economy, it is no surprise that mutual
fund investors find this emerging market attractive. Brazil has a booming middle class.
Recently, President Obama noted that 30 million Brazilians have been added to the Brazilian
middle class in the past 10 years. (Martin) After all, Brazil implemented successful anti-
poverty programs that have lifted individuals out of poverty to become part of the middle
class. (Brazil: Country Profile). The average wages of Brazilian citizens from all age groups
have increased in recent years. (Consumer Lifestyles: Brazil) Therefore, consumers have had
an increased amount of disposable income to spend and invest in the Brazilian economy.
(Consumer Lifestyles: Brazil) This has led to an increased amount of consumer spending
across all broad categories in recent years. (Consumer Lifestyles: Brazil) Young females in
Brazil are joining the workforce and declaring their financial freedom. (Consumer Lifestyles:
Brazil) They have become a unique consumer sector as they have taken advantage of career
opportunities and have spearheaded consumer demand in household items. (Consumer
Lifestyles: Brazil) In addition, young Brazilians have spearheaded an increase in the purchase
of Internet access, DVD players, game consoles and telephones. (Consumer Lifestyles:
Brazil) E-commerce has become a trend in Brazil. From 2005 to 2009, e-commerce sales
increased by 255%. (Consumer Lifestyles: Brazil) In addition, there has been a rise in
consumer credit. According to Euromonitor Passport, credit card usage increased by 106%
from 2005 to 2009 and banks lent to consumers at increasing rates, which led to a rise in the
number of mortgages. (Consumer Lifestyles: Brazil) Exhibit 5 illustrates the wage increases
of Brazilian citizens from various age groups from 2005-2009. Exhibit 6 illustrates the
increased consumer lending by Brazilian banks as well as a successive increase in the number
of mortgages. Exhibit 7 illustrates the increased luxury item purchases by Brazilian
households from 2005-2009. The source of all information from the graphs is Euromonitor
Passport.
20-24 yrs 25-29 yrs 30-34 yrs 35-39 yrs 40-44 yrs 45-49 yrs10,000
12,500
15,000
17,500
20,000
22,500
20052006200720082009
BRAZIL AVERAGE ANNUAL GROSS IN-COME BY AGE
(Exhibit 5)
2005 2006 2007 2008 20090
50000100000150000200000250000300000350000400000
204,537246,867
308,333357,600
395,703
30,845 38,811 55,563 74,614 100,948
Consumer lending (millions) Mortgages (millions)
BRAZILIAN CONSUMER LENDING AND MORTGAGES
(Exhibit 6)
2005 2006 2007 2008 20090.00%
10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%90.00%
Video Game Console
Broadband Internet Access
DVD player/recorder
Mobile telephone %
% of Brazilian Households with Luxury Items
Source: Eu-roMonitor Passport
(Exhibit 7)
II. ASIA-PACIFIC REGION
In almost every diversified emerging market mutual fund that was analyzed, mutual fund
managers allocated most assets in the Asian-Pacific Region. The Asia-Pacific Region has been a
powerful economic nucleus for a long period of time. The economic strength of the Asia-Pacific
region can be confirmed by the massive amount of inter-regional trade that takes place. Asian-
Pacific nations are heavily dependent upon each other for economic growth. According to Euro-
Monitor Passport, nearly 45% of Asia-Pacific exports came from within the region in 2010.
(Asia Pacific: Regional Profile) The economic interdependence within the region can be seen in
the export percentages of various emerging markets within the region. In 2010, Hong Kong
exported 67.1% of their goods within their own region. (Hong Kong: Country Profile) Thailand
exported 54.9% of their goods within the region. (Thailand: Country Profile) Furthermore, the
percentage of the region’s exports from North and Latin America has decreased from 27.8% to
19.7% between 2000 and 2009. (Regional Focus) This demonstrates the region’s decreased
reliance on the Western Hemisphere. In addition, the GDP growth of the Asia-Pacific Region
increased by 4.3% to an overall rate of 8.0% in 2010. (Asia Pacific: Country Profile) The
following exhibits illustrate the economic progression of the Asia-Pacific region. Exhibit 8
illustrates the economic interdependence of the Asia-Pacific region through the export
percentages of Hong Kong, South Korea, China, Thailand, Philippines and Vietnam. Exhibit 9
displays the overall development of the Asia-Pacific region through Asia-Pacific export imports
and GDP in U.S Dollar terms.
Hong Kong
Phillpines
South
Korea
Thail
and
Vietnam
China0.00%
10.00%20.00%30.00%40.00%50.00%60.00%70.00%80.00%
Asia-PacificEuropeNorth America
2010 EXPORT SOURCES OF ASIA-PACIFIC NATIONS
Source: Eu-romonitor Passport
(Exhibit 8)
2005 2006 2007 2008 2009 20100.00
2,000,000.004,000,000.006,000,000.008,000,000.00
10,000,000.0012,000,000.0014,000,000.0016,000,000.0018,000,000.00
Total exports (mil-lions)
Total imports (mil-lions)
GDP (US$ millions)
Asia Pacific's Exports, Imports and GDP
(Exhibit 9)
Source: (Asia Pacific: Country Profile)
The Asia-Pacific Region is comprised of emerging market stalwarts such as China and
India. However, it is important to discuss the recent successes of other emerging markets that
have helped to spearhead the success of the entire Asia-Pacific region. Vietnam’s success has
been spearheaded by growing middle class prosperity and economic reform by their government.
(Vietnam: Country Profile) Recently, the Vietnamese government has announced that they
intend to privatize government-owned firms. Clearly, Vietnam desires to shift to a business
environment driven by the private sector. After all, private investment is a main economic driver
in Vietnam. (Vietnam: Country Profile) In 2011, Vietnam improved dramatically as a nation in
which business can be done due to their government’s economic modifications. Vietnam
improved in terms of the business startup process as well as happenings with construction
documents. (Doing Business in Vietnam) Vietnam jumped 10 spots in the world rankings in the
“Ease of Doing Business” annual reports released by the World Bank. (Doing Business in
Vietnam) Vietnam’s annual average income dramatically increased from 7,907,330 Vietnam
Dongs in 2005 to 15,684,284 Vietnam Dongs in 2009. (Vietnam: Consumer Lifestyles) Annual
disposable income nearly doubled from 6,689,701 in 2005 to 13,360,354 in 2009. (Vietnam:
Consumer Lifestyles) A powerful aspect of the Vietnamese economy is that almost 60% of the
population is under the age of 30. (Vietnam: Consumer Lifestyles) They are taking advantage of
increased annual disposable incomes. (Vietnam: Consumer Lifestyles) This can be reflected in
the rapid rise in Internet and mobile phone usage. Internet usage in Vietnam has increased by
112.5% since 2005. (Vietnam: Consumer Lifestyles) Mobile phones went from taking up 7.5%
of all households in 2005 to 27.5% of Vietnamese homes in 2009. (Vietnam: Consumer
Lifestyles) South Korea has a thriving business environment. It is currently ranked 16th in the
world in the World Bank’s latest “Ease of Doing Business” rankings. (Doing Business in Korea,
Rep) South Korea is recovering strongly from the global economic crisis. In 2010, the South
Korean GDP growth percentage was 5.7%. (South Korea: Country Profile) This is a dramatic
turnaround from a meager 0.1% total in 2009. (South Korea: Country Profile) Similar to the
Vietnamese economy, the South Korean economy was boosted by the increasing incomes of its
citizens. The annual average income for South Korean citizens increased from 12,053,224 Won
in 2005 to 14,840,339 Won in 2009. (Consumer Lifestyles: South Korea) In another sign of
economic progress, South Korean banks have increased consumer lending by 19.1% from 2005
to 2009. (Consumer Lifestyles: South Korea) Another thriving emerging market in the Asia-
Pacific region is Hong Kong. According to the latest “Ease of Doing Business” rankings by the
World Bank, Hong Kong is the second easiest nation in the world to do business. (Hong Kong:
Country Profile) Wealthy individuals pay meager taxes and business competition is very limited.
Hong Kong’s GDP Growth percentage was 6.0% in 2010, a significant turnaround from an
economic contraction of -2.8% in 2009. (Hong Kong: Country Profile) Hong Kong’s economy
benefited from an increase in consumer lending and a drop in the unemployment rate. (Hong
Kong: Country Profile) The Hong Kong economy also benefited from the economic recovery of
neighboring China. (Hong Kong: Country Profile) Since China is a large source of Hong Kong’s
exports, Hong Kong benefited from the increased trade of exports with China in 2010. (Hong
Kong: Country Profile) Therefore, one can see why emerging market investment managers direct
their investments toward the Asian-Pacific Region. Economic wealth is spread within the region
due to strong interregional trade. Most importantly, the region has a significant amount of
budding emerging markets that are very business-friendly.
There are many unique investment strategies, philosophies and tactics used by emerging
market investment managers. It is important to analyze them in great detail. I found that the
prevailing strategy in most mutual funds is an investment philosophy based on detailed company
research and bottom-up equity selection. Investment managers at the Templeton Small-Cap
Emerging Market Fund visit up to 1500 firms per year in order to evaluate a firm’s
administration. (FRANKLIN TEMPLETON) Along with fundamental research and bottom-up
stock selection, a common strategy that is currently used by investment managers is to find
underpriced emerging market equities through price-multiple analysis. Templeton Investment
managers looked at the price-earnings ratio as a key ratio in which to find value stocks for their
portfolio. (FRANKLIN TEMPLETON) In the Dimensional Fund Advisors Core Portfolio,
investment managers determine a stock’s value in a mutual fund portfolio via the price-earnings
ratio, price to cash flow ratio and its book to market value. (Emerging Markets Core Portfolio)
In addition, investment managers seek the equities with effective profitability. Virtus Emerging
Markets Opportunities Fund screen equities with a sufficient return on equity and return on
assets. (Virtus) Bottom-up equity selection is not the prevailing strategy in emerging market
investing. Investment managers of emerging market mutual funds can also combine stock
selection from the bottom-up with top-down country selection. Investment managers of
Causeway Emerging Markets mutual fund have adopted this unique strategy. (Causeway Funds)
They combine the priority of seeking out emerging market firms with superior earnings forecasts
that are attractively priced with the tactic of finding a nation with strong macroeconomic factors
such as GDP and industrial production statistics. (Causeway Funds) Causeway Emerging
Markets incorporates an alpha model that incorporates both firm-specific and country-specific
factors. (Causeway Funds) The model is 2/3rd firm-specific and 1/3rd country-specific.
(Causeway Funds) Dunham Emerging Markets Fund handles both factors through an investment
tactic that tests the strength of relative prices. (Dunham & Associates) The investment managers
at Schroeder’s Global Emerging Markets equity go through a detailed scrutiny of stocks and
emerging market countries. Schroeder’s analyzes a nation’s valuation through price-multiple
analysis. It also looks at the nation’s potential growth through earnings growth and return on
earnings. (Schroeders Fund) Schroeder also looks at a country’s exchange rate, GDP and real
interest rate. At the same time, Schroeder’s incorporates detailed fundamental research on firms.
(Schroeders Fund) They use a detailed valuation model that generates forecasts for three-year
earnings and cash flows. In addition, they use price-multiple ratios such as price to cash flow
and price to net asset value. (Schroeders Fund)
Emerging market equity mutual funds have always been boosted by reliable emerging
market equities that have taken up a large percentage of their key holdings However, there are
some emerging market equities that are currently spearheading great portfolio returns posted by
emerging market equity mutual funds. I have decided to look at 6 equities that are currently
spearheading the emerging market sector. The first three equities have been found in the top ten
key holdings of many emerging market mutual funds that I have analyzed. In addition, I looked
at the Bloomberg percentage returns of 26 emerging market equity funds. (Refer to Appendix A
for list) The last three equity holdings were most frequently found in the top ten in terms of
percentage returns for those funds. It is important to look at those equities in great detail.
I. VALE SA
Brazilian-based Vale SA has been an emerging market stalwart for a long period of time.
Currently, Vale is one of the leading metals and mining firm in the world in terms of market cap.
(Vale-Get to Know Vale) Vale operates in the following lines of business: ferrous minerals, (iron
ore, manganese ore) non ferrous minerals, (nickel, copper, aluminum, fertilizer nutrients) coal
and infrastructure. (Vale-Mining) Vale is the globe’s largest iron ore producer as well as one of
the world’s top nickel producers. Vale has combined its logistics strategy with its mining
ventures. (Vale Across the World) They utilize railroads, ports and nautical means of transport
in order to help transport key metals to strategic areas. Currently, Vale has nine ports and
terminals used for its logistics strategy. Vale has invested 9 billion dollars towards its logistics
strategy in the past 6 years. (Vale-Home) In addition, Vale SA is looking to increase its
investment in fertilizer nutrients. Vale aims to become a global leader in fertilizer production in
the next seven years. (Vale-Fertilizers) A critical aspect of Vale’s growth strategy is mineral
exploration. The company travels to more than twenty nations across the world to secure new
natural resources and find many key metals. (Vale-Mineral Exploration) Energy projects are
essential to Vale’s current success. Vale invests in power supply developments in order to
protect themselves from wide swings in energy prices as well as against scarcity in the energy
supply. Currently, Vale is making major strides in becoming a major player of the copper
industry. (Vale-Energy). Vale’s latest quarterly results demonstrate why mutual fund investors
hold this equity in high regard. In the 4th quarter of 2010, Vale demonstrated its strength by
making a profit of 5.92 billion dollars. (Kinch) Exhibit 10 illustrates Vale’s superior
performance vs. the S&P 500 and the IShares MSCI Emerging Markets Index ETF. Exhibit 11
illustrates Vale’s superior performance to the BOVESPA index.
(Exhibit 10) Source: Yahoo Finance
(Exhibit 11) Source: Bloomberg
In further evidence of its dominance, Vale has shown a consistent increase of income and
profitability totals. Exhibit 12 exhibits the budding profitability ratios of Vale SA from 1990 to
2010.
(Exhibit 12) Source: Bloomberg
II. SAMSUNG ELECTRONICS
Based in South Korea, Samsung is one of the world’s principal electronic firms. Samsung
focuses on a wide range of electronic products such as semiconductors, digital machines and
media. (SAMSUNG) Samsung is geared towards high-quality products that give them a
differential advantage. Currently, Samsung has outlined a vision in which it hopes to earn up to
400 billion dollars in revenue by the year 2020. (Vision-Corporate Profile) They hope to achieve
this vision through their current program called “Vision 2020”. (Vision-Corporate Profile)
Samsung is considering a move to enter the medicine and biotechnology industry. Samsung has
had quite a storied history of major innovative accomplishments. In 2000, it created the world’s
first 512 mega-byte dynamic random access memory drive. (About Samsung) A year later, it
would launch the electronic industry’s first ever handset that was ultra-slim. (About Samsung) It
was a pioneer in terms of Digital TV. Samsung created a 54 inch LCD TV that was the largest
digital TV ever created at the time. (About Samsung) Samsung also redefined the way cell
phones were made. In 2005, it made the first cell phone that was programmed for speech
recognition. (About Samsung) That same year, it also created the first cell phone that was 7
megapixels. However, Samsung would really take their innovative achievements to another
level in 2009 and 2010. (About Samsung) In 2009, Samsung released the world’s first high-
definition camcorder that had a 64-GB solid-state disk. (About Samsung). In addition, Samsung
became a pioneer in 3D Technology when it released the first-ever 3D TV Model in 2010.
(About Samsung) Samsung continues to display financial dominance. SamSung recently posted
fourth-quarter results of 41.87 trillion Won in revenue. (Samsung Electronics Announces Fourth
Quarter & FY 2010 Results) In 2010, Samsung had its best year in terms of revenue and its net
income increased by 65% from 2009. (Samsung Electronics Announces Fourth Quarter & FY
2010 Results) Samsung’s overall success can be seen in its increasing revenue and earnings per
share totals shown in Exhibit 13.
(Exhibit 13) Source: Bloomberg
III. TAIWAN SEMICONDUCTOR MANUFACTURING
Taiwan Semi-Conductor Manufacturing was founded in 1987. This firm established the foundry
business model. (Company Profile) It is primarily involved in the manufacturing and distribution
of integrated circuit products. (Company Profile) This firm has recently expanded from
integrated circuit foundry by investing into the solar and lighting industries. (Company Profile)
The firm ventured into solar and lighting in August 2009. (Lighting) Taiwan Semiconductor
Manufacturing has emphasized their commitment towards the best quality on demand for their
customers. Their quality is emphasized through their innovative quality management system.
(Quality Management System) Their quality management system is emphasized by 6 major
processes: design services, wafer manufacturing, mask masking, backend service, customer
satisfaction and technology development. (Quality Management System) The success of Taiwan
Semi-Conductor Manufacturing can be seen in its most recent financial quarterly numbers shown
in Exhibit 14. (Quarterly Results)
4th Q 2009 1st Q 2010 2nd Q 2010 3rd Q 2010 4th Q 2010
32666 33663 40282 46940 40472
92084 92187 104962 112247 110142
The Progress of Taiwan Semconductor Manufacturing (in millions)
Consolidated Net Income Consolidated RevenueSource: www.tsmc.com
(Exhibit 14)
The next three equities were found by looking at analyzing the ten biggest contributors of total
returns of twenty-six emerging market equity funds. These equities were the firms that were
found most frequently as top return contributors. (Refer to Appendix A)
IV. GAZPROM
Gazprom is a large energy company located in Russia. Gazprom places a special emphasis on
the storage, transport and production of gas and different hydrocarbons. (About Gazprom) They
also deal with the supply of heat energy and electrical power. (About Gazprom) Half of Gazprom
is owned by the Russian government. (Gazprom Today) The primary aim of Gazprom is to
become a world leader in energy through the strategic entry of new markets as well as business
diversification. (Gazprom Today) Gazprom is a world leader in the storage of natural gas and a
reliable gas supplier to Russia as well as other foreign nations worldwide. (Gazprom Today) The
department that is responsible for gas delivery to foreign consumers is Gazprom’s Central
Operations and Dispatch Department, which is responsible for the gas supply of Russia. (Central
Operations and Dispatch Department) The firm also hopes to use its geographic setting to
capitalize on business in the markets of Europe and Asia. (Gazprom Today) According to
Gazprom’s website, the firm owns 165 gas distribution companies. (Gazprom Today) This aids
Gazprom to have a competitive edge in terms of gas distribution and transport. Gazprom’s
business strategy lies in its strong presence in the oil and power making industries. Gazprom is
currently assisting Japan with its electrical issues due to the recent earthquake. (Gazprom,Shell)
Gazprom has increased their deliveries of liquefied natural gas in hopes that it will help Japan
gain control of its electrical grid. (Gazprom, Shell) Out of the 26 emerging market equity mutual
funds that were analyzed, Gazprom was a top ten contributor of total return in thirteen mutual
funds. The information was comprised as of April 14th 2011. Exhibit 15 displays Gazprom’s
progress in terms of stock growth as well as its net income and revenue progression. (Oao
Gazprom)
2002 2003 2004 2005 2006 2007 2008 20090
10000
20000
30000
40000
50000
60000
70000
80000
Gazprom Net IncomeGazprom Revenue
GAZPROM'S PROGRESSION (in Euros)
Source: Hoovers.com
(Exhibit 15)
V. HTC CORPORATION
HTC Corporation is a telecommunications firm based in the emerging market of Taiwan. It
was founded in 1997 by the following individuals: Cher Wang and Peter Chou. (About HTC)
HTC was originally built to be a maker of mobile handsets. However, HTC has expanded its
reach and vision. (About HTC) HTC aims to become a global leader in the supply of mobile
data and communication appliances. HTC made its mark on the telecommunications industry
through strategic partnerships with the top mobile operators in Europe, United States and Asia.
(About HTC) HTC’s partnerships with firms such as Microsoft and Intel allowed HTC to bring
innovation to the smartphone market. (About HTC) HTC has lived to its innovative credentials
by introducing ground-breaking products into the industry. It was the maker of the first palm-
size color PC in 1999 as well as the first Microsoft 3G phone in 2005. (About HTC) In recent
years, HTC has hit its stride. HTC was named the 31st most inventive firm according to Fast
Company Magazine in February 2010. (Mascai) Recently, HTC just introduced a new product
called the HTC Sensation 4G in order to gain ground in the EU market. (List of Public
Companies Evaluated) HTC Corporation was a top ten contributor in total return in eleven of the
26 mutual funds analyzed. HTC’s growth is illustrated in Exhibit 16 and 17. Exhibit 16
indicates HTC’s stock performance over the past nine years. Exhibit 17 illustrates HTC’s recent
success based on a comparison of 2010 financials to its financials in 2009.
(Exhibit 16) Source: Yahoo Finance
Net Income Gross Profit Total
Revenues
0
50000
100000
150000
200000
250000
300000
20092010
HTC CORPORATION
(Exhibit 17) Source: (HTC CORP)
VI. KIA MOTORS CORP
Kia Motors Corporation is an automobile manufacturing organization based in the emerging
market of South Korea. It was founded back in 1944. (History of Kia) Kia Motors Corporation
had originally started as a bicycle part and a steel tubing manufacturer. (Kia Corporate History)
Kia would produce it’s first-ever domestic bicycle in 1957. (History of Kia) Kia’s first
automobile was the K-360 truck in 1962. (History of Kia) Kia would create its first ever
Source: Bloomberg Businessweek
research and development center in 1984. (Kia Corporate History) By 2006, Kia would sell over
two million vehicles in the United States. (Kia Corporate History) Kia has had an amazing run
of success that has been noted in recent years. In 2010, Kia celebrated it’s 15th straight year of
added market share and sold it’s three millionth vehicle. (Kia Corporate History) Kia also
announced record sales for February, March, May, June, July,August, September,October and
November of 2010. (Kia Corporate History) Needless to say, Kia Motors posted an all-time
record for sales in 2010 with 356,268 units. (Kia Corporate History) This was more than 50,000
units more than what Kia Motors had sold in 2009. Kia also broke records in terms of revenue
and overall profits. KIA would continue it’s strong momentum in 2011. On April 1st 2011, Kia
Motors proclaimed that the first quarter of 2011 was the best quarter in company history in terms
of sales. (Seeking Alpha) With the massive amount of recent success, it is no wonder why Kia
Motors was found to be a top ten contributor in nine of the 26 mutual funds that I had analyzed.
Exhibit 18 displays Kia Motor Corp’s recent progression in terms of net income. Exhibit 19
show’s Kia’s success in terms of it’s successive increase in revenues. One can see that Kia
Motor’s record-setting 2010 performance was reflected within these totals. (Bloomberg
Businessweek)
2007 2008 2009 2010-50,000.00
0.0050,000.00
100,000.00
150,000.00200,000.00250,000.00300,000.00
Kia Motors Net Income
Net Income
(Exhibit 18)
Source: Bloomberg Businessweek
2007 2008 2009 20100.00
1,000,000.00
2,000,000.00
3,000,000.00
4,000,000.00
5,000,000.00
Kia Motors Total Revenues
Total Revenues (Exhibit 19)
In order to gauge a proper diagnosis of emerging markets through diversified emerging market
equity mutual funds, I analyzed the overall portfolio performance of various emerging market
mutual funds based on overall portfolio’s risk as well as risk-to return indicators versus its major
benchmark. This information was gathered using reports from Bloomberg. The risk indicator
that I used was downside risk. The risk-to return indicators used were excess return, information
ratio and Jenson’s Alpha. All of these indicators were measured on an annual basis. Downside
Risk can be defined in two ways. It measures the likelihood of an asset’s drop in value as well as
the extent of the asset’s decline. (Investor Words) Excess return is a measurement of the
additional profits made in excess of the riskless rate or a major benchmark index. (Excess
Returns Definition) The major benchmark index that the excess return will be measured against
is the MSCI Emerging Markets Index. The information ratio calculates the proportion of mutual
fund portfolio returns that exceed the returns of a major index against the volatility of those extra
returns. (Information Ratio (IR) Definition) The volatility of those extra returns is known as the
tracking error. (Information Ratio (IR) Definition) The information ratio is measured as
follows: Portfolio Return−Index Return
Tracking Error This ratio is deemed to be a great indicator of the
expertise of investment managers. Typically, a good information ratio is an information ratio
over 0. (Clement) A great information ratio is a ratio between 0.5 and 1.0. (Clement) If an
information ratio is over 1, it is considered to be phenomenal. (Clement) Jenson’s Alpha is a
calculation that measures the difference between the expected overall portfolio return and the
expected portfolio return based on the Capital Asset Pricing Model (CAPM). (Jenson’s Measure
Definition) Thus, this represents a measurement of the alpha of a mutual fund portfolio.
(Jenson’s Measure Definition) Jenson’s alpha is a unique measure in determining if a mutual
fund portfolio is earning a decent return in accordance with its risk level. A positive Jenson’s
alpha indicates that an investment manager is outperforming the market: (Jenson’s Measure
Definition) The formula for Jenson’s alpha is the following:
α ρ=r ρ−[rf +βρ (rm−rf ) ]
r ρ=Return onthe Portfolio βρ=beta rf =riskless rate rm=market return
I measured the downside risk statistics of 39 emerging market equity mutual funds. (Refer to
Appendix B for list) I measured whether the downside risk was either higher or lower than the
MSCI Emerging Markets Index benchmark. This data was gathered between March 30th 2011
and April 13th 2011. The results suggest the inherent riskiness that exists within emerging
markets. I found that 26 out of the 39 mutual funds had a downside risk that is higher than the
MSCI benchmark index. These downside risk results seem to be a clear indicator that emerging
market mutual funds have a greater deal of risk and sensitivity when it comes to adverse market
condition. Now I will discuss the results of the indicators that measure risk to return: excess
return, information ratio and Jenson’s alpha. All of the information on these indicators was
measured annually by Bloomberg. I analyzed the excess returns of 42 mutual funds versus the
MSCI emerging market index benchmark. (Refer to Appendix C for list of funds) Excess returns
were measured on the basis of whether they were positive or negative. My results showed that
there were positive excess returns on 24 emerging markets equity funds and 18 emerging market
equity funds with negative excess returns. Based on these results, this shows that mutual fund
managers are exceeding the risk-free rate of return or the returns of major indexes such as the
MSCI Emerging Market Index. Exhibit 20 displays a breakdown of the 24 positive excess
returns that I found in my results. As one can see, a good chunk of emerging market equity
funds outperformed the market index by a significant margin:
EXCESS
RETURN
CATEGORY
Amount of Funds
within that category
0.0-1.0 Six
1.0-3.0 Eight
3.0-5.0 Six
> 5.0 Four
(Exhibit 20) Source: Bloomberg
Next, I looked at the information ratio of 42 mutual funds. (Refer to Appendix C for list of
funds) The information ratio results mirror the excess return results. Emerging market equity
mutual funds with positive or negative excess returns had corresponding positive or negative
information ratios. Therefore, it is assumed that excess returns and information ratios go hand in
hand. Therefore, I decided to tally the extent of the positivity of information ratios. According
to a CFA report on the information ratio, the median information ratio vs. the S& P 500 over 3
years was 0.35. (Clement) Thus, I decided to measure how many mutual funds were below or
above that median benchmark. Exhibit 21 displays a breakdown of the positive information
ratios. A total of 13 mutual funds were over the median benchmark of 0.35. Eight mutual funds
had what would be considered a good information ratio. However, the difficulty of an
investment manager to obtain an exceptional information ratio is indicated in the final category.
(Exhibit 21)
(Source: Bloomberg)
Next, I tallied the Jenson’s Alpha results using the measurements of the same mutual funds
that I had used to tally the excess return and the information ratio. Jenson’s Alpha were
measured based on whether they were positive or negative. The results were nearly even. 22
emerging market mutual funds generated positive Jenson’s Alpha totals while 20 emerging
mutual funds generated negative totals. The results show that a fair share of investment
Information Ratio
Category
Amount of Mutual
Funds in Category
< 0.35 Eleven
0.35 to 0.5 Three
0.5 to 1 Eight
>1 Two
managers have done well to ensure that their funds are generating desirable returns in accordance
with their risk levels.
In summary, there can be arguments that can be made for the riskiness of emerging markets.
As I have noted, 2/3rd of the measured diversified emerging market mutual funds has a potential
price decline that may be greater than the MSCI Emerging Market Index benchmark. This is a
clear indicator of the significant downside risk that emerges in emerging market mutual funds.
At the same time, a majority of emerging market equity mutual funds was found to have a
positive excess return, information ratio and Jenson’s alpha. The positive results of the risk-to-
return indicators shows that emerging market return compensates for its risk immensely.
I decided to use price-multiple analysis in order to determine whether emerging markets
equity mutual funds are overvalued or undervalued. I used the following price-multiple ratios:
Price-to earnings ratio and Price-to book ratio. The information was gathered using data from
Standard and Poor’s. Most of the data was gathered on April 2nd. However, some data was
gathered on April 8th and April 16th. This was done by analyzing 41 diversified emerging
market mutual funds. (Refer to Appendix D for list of funds) Twenty-four of those emerging
market mutual funds have price-earnings ratios below the benchmark while seventeen emerging
market mutual funds surpassed its peer benchmark. 25 emerging market mutual funds had
price-to book ratios below the benchmark while 16 had price-to book ratios that exceeded the
benchmark. These results suggest that emerging markets equity mutual funds are generally
undervalued. Undervalued emerging equity mutual funds in my analysis present the assertion
that emerging markets are undervalued. According to recent news, many people in the financial
industry seem to agree. In a recent survey by Northern Trust Global Advisors, it was found that
43% of money managers believe that emerging markets are underpriced. (Inklebarger) On April
7th 2011, it was noted that the price-earnings ratios of many emerging market nations were
undervalued in comparison with their major stock indexes. (Patel)The underpriced nations
included Brazil, Turkey, Indonesia, South Africa, India and Mexico. (Patel) A recent report by
IShares indicated that the MSCI Emerging Market Index was undervalued vs. the MSCI U.S
Equity Index. (Ishares) The MSCI Emerging Market Index’s price-earnings ratio and price-to
book ratios were 14.1 and 2.1 compared to the MSCI U.S Equity Index’s 16.2 and 2.3. (Ishares)
Thus, there is plenty of reason to believe that emerging markets are underpriced.
In order to gauge a greater accuracy of the current status of emerging markets, I looked at the
different emerging market outlooks and quarterly commentaries from investment managers of
diversified emerging market equity funds. Then I did my own research in order to determine the
accuracy of their assessments. I decided to look at the different outlooks and commentaries of
investment managers from the 4th quarter of 2010. I will summarize key concerns and highlights
outlined by investment managers within the quarterly commentaries.
EMERGING MARKET INFLATION
One common concern among emerging market investment managers was the threat of
inflation in emerging market nations. Aberdeen Asset Management pointed to the recent
tightening of interest rates in the emerging markets of India, Hungary, South Korea and China.
(Aberdeen Asset Management) Columbia Emerging Markets Funds emphasized the urgency of
inflationary pressures in emerging markets by pointing out that the consumer price indexes in
emerging market nations are primarily geared food items. (Columbia Funds) This point was
further emphasized by investment managers at Oppenheimer Developing Markets.
(Oppenheimer Developing Markets) According to their 4th quarter commentary, they pointed out
that food-price items accounted for 33% of a person’s total shopping expenses in China and 46%
of one’s shopping expenses in India. (Oppenheimer Developing Markets) Investment managers
at Van Eck Emerging Market Funds also pointed to a rise in commodity prices for spiking
emerging market inflation. Van Eck managers also placed blame on the interest-rate lowering
decisions by the United States central bank for inciting inflationary pressures in emerging
markets. (Van Eck) The move could potentially bring a tremendous amount of monetary
inflows into emerging market nations. (Van Eck) However, this may adversely affect emerging
market currencies and spike emerging market inflation even further. (Van Eck) This point was
emphasized in the quarterly commentaries by investment managers at Van Eck Emerging
Markets Funds and Columbia Emerging Market Funds. (Van Eck) (Columbia Funds)
Investment managers are putting the onus on central bank regulators to combat emerging market
inflation in the best way possible. At the present time, it seems that inflation still appears to be a
glaring issue in emerging markets. According to an article by the International Business Times,
emerging market inflation concerns have spiked thanks to inflation increases in India and China.
(IBTimes) China’s consumer price rose by 5.4% by March 2011. (IBTimes) Brazil’s consumer
prices increase rose by 6.3% This marks the largest inflationary increase in three years
(IBTimes) India’s consumer prices rose by nearly 9% as of March 2011. (IBTimes) South
Korea’s CPI rose 4.7% in March 2011, the biggest monthly increase in more than two years.
(Olsen) It is clear that numerous efforts are being made by emerging market nations to curb this
issue. Recently, India has increased its interest rate for a ninth time in the past 15 months. (BBC
News) They have recently increased their interest rate by 50 basis points to 7.25%. (BBC
News) China’s central bank increased its interest rate on April 5th by 25 basis points to 6.31%.
(Censky) On April 21st 2011, Brazil increased its interest rate by 0.25% to 12% in a grand effort
to curb the inflation rate. (Brazzil Mag) An article by Euromonitor Passport suggests that the
expanding middle class and population growth in many emerging nations sparked the current
inflation problem by causing food prices to rise uncontrollably. (Special Report) A hefty amount
of emerging market inflows could potentially spike inflation. A recent report by the Institute of
International Finance estimated that 1 trillion dollars of privately invested cash may reach
emerging markets during this year. (Talley) In addition, a recent EPFR Global report showed
that emerging market equity funds posted almost 1.6 billion dollars in a week in April.
Emerging market investment managers can rest assured that central banks in emerging market
nations are making the necessary moves to curb inflation. However, their tactics have not been
effective in solving the problem. It is clear that inflation is a glaring predicament in the world of
emerging markets.
MOUNTING COMMODITY PRICES BENEFIT ENERGY & MATERIALS SECTORS
Many emerging market investment managers have noted the robust results in the energy and
material sectors in their market outlooks as well as in their individual portfolios. However, these
results can be traced to boosted commodity prices. This vast increase in commodity prices is
reflected in Exhibit 22. (Commodity Price Index)
Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11150
160
170
180
190
200
210 Commodity Price Index - Monthly Price
Source:IndexMundi
(Exhibit 22)
The successful performances of these sectors were reflected in some diversified mutual fund
portfolios. In the 4th quarter of 2010, Oppenheimer Developing Markets Fund’s posted a 23.4%
return for the materials sector while having a sector portfolio weight of only 7.9%.
(Oppenheimer Developing Markets) It was the highest return in the entire portfolio.
(Oppenheimer Developing Markets) Wells-Fargo Adventure Fund was underweight against the
index in the materials sector by -2.84% and -4.31% and yet outpaced the index in 0.72% and
0.46% by return (Wells Fargo). Many diversified emerging equity mutual funds noted that
Russia and South Africa have thrived along with the energy and materials sectors. Invesco
Emerging Markets Equity Funds noted that Russia and South Africa had spearheaded emerging
market performance with double digit gains in the 4th quarter of 2010. (Invesco) Their increases
were 16.5% and 13.12% respectively. (Invesco) Russia and South Africa have a strategic
partnership. In August of 2010, Russia agreed to supply South Africa with uranium for their
power plants. Thus, it is not surprising that both nations have spearheaded the energy and
material sectors.
CONCLUSION
There is an unmistakable potential for emerging markets to grow immensely in the near
future. Through my analysis of Brazil and the Asia-Pacific region, it has become clear that the
primary source of emerging market growth is an immense increase in consumer consumption.
This fact is the source of increased optimism by investment managers for the continued success
of emerging markets. Consumer demand will continue to increase along with the expanding
middle class of emerging market economies. After all, the emerging market middle class spends
nearly 7 trillion dollars a year presently. (GloboTrends) In 2020, it is estimated that the
emerging market middle class will spend 20 trillion dollars. (GloboTrends) There is no question
that increased global consumption has been the primary reason why aforementioned holdings
such as Vale SA, Samsung, Kia Motors and HTC Corporation are driving emerging market
mutual fund performance presently. In addition, the end result of my price-multiple analysis
suggested that emerging markets still has room for even more growth. Furthermore, I have
shown through the analysis of risk and risk vs. return indicators that while emerging market risk
is significant, the payoff is more than enough. However, it is clear that the primary reason for
emerging market success may be one of the top reasons for its hindrance. Increased emerging
market consumer spending has spiked food and price inflation. The immense magnitude of
emerging market inflows may only serve to make inflation a bigger impediment in the progress
of emerging markets. It is also quite a concern that major emerging markets such as China, India
and Brazil have failed to stem inflation despite increasing interest rates numerous times in recent
months. In spite of this pressing issue, it is my position that the current status of emerging
markets is strong. As I have noted, the energy and material sectors of emerging markets benefit
from an inflationary increase in commodities. I believe that the central banks in emerging
market economies recognize the urgency of the inflation issue and that they will eventually put a
halt to the problem via continuous interest rate hikes. I feel that the growth potential of emerging
markets will win out in the end.
LIST OF APPENDIXS
APPENDIX A:
This appendix contains a list of 26 diversified emerging market mutual funds that were analyzed in order to find three equity holdings that were most frequently found among the top ten performers in terms of total return within those funds:
Aberdeen Emerging Markets Fund Janus Emerging Markets Fund
Allianz NACM Emerging Markets Fund John Hancock Funds II = Emerging Markets
American Beacon Emerging Markets Fund Laudus Mondrian Emerging Markets Fund
Causeway Emerging Markets Fund Lazard Emerging Markets Fund
Columbia Emerging Markets Fund Legg Mason Emerging Markets Fund
Delaware Emerging Markets Fund Marshall Emerging Markets Fund
Driehaus Emerging Markets Fund MFS Emerging Markets Fund
Dunham Emerging Markets Fund Oppenheimer Developing Markets Fund
DWS Emerging Markets Fund UBS Pace International Emerging Markets
Eaton Vance Structured Emerging Markets Fund Principal Inv FD – International Emerging
Forward Emerging Markets Fund Markets
GMO Emerging Markets Fund
Hansberger Emerging Markets Fund
Harding-Loevner Emerging Markets Fund
Ing Emerging Countries Fund
Invesco Developing Markets Fund
APPENDIX B:
The following appendix contains a list of 39 mutual funds that were used to measure the risk indicator known as downside risk.
Aberdeen Emerging Markets Fund A = (GEGAX)
Allianz Agic Emerging Markets Opportunities Fund A= (AOTAX)
American Beacon Emerging Markets Fund; Investor= (AAEPX)
Causeway Emerging Markets Institutional Fund= (CEMIX)
Columbia Emerging Markets Fund Z = (UMEMX)
Delaware Emerging Markets Institutional Fund= (DEMIX)
Dimensional Fund Advisors Value Portfolio= (DFEVX)
Driehaus Emerging Markets Growth Fund = (DREGX)
Dunham Emerging Markets Stock Fund = (DNEMX)
DWS Emerging Markets Equity Institutional Fund = (SEKIX)
Forward Emerging Markets Institutional Fund = (PTEMX)
GMO Emerging Markets Fund III = (GMOEX)
Goldman Sachs Emerging Markets Institutional Fund = (GEMIX)
Hansberger Emerging Market Fund – Advisor (HEMMX)
Harding Loevner Emerging Markets Portfolio = (HLEMX)
ING Emerging Markets Countries Fund A = (NECAX)
Invesco Developing Markets Fund A = (GTDDX)
John Hancock Emerging Markets Value Fund = (JEVNX)
Lazard Developing Markets Equity Portfolio: Institutional = (LDMIX)
Legg Mason BatteryMarch Emerging Markets Trust I = (LGEMX)
Marshall Emerging Markets Equity – I = (MIEMX)
MFS Emerging Markets Equity - I = (MEMIX)
Oppenheimer Developing Markets Fund – Y = (ODVYX)
Pace International Emerging Markets Equity Investments (PWEAX)
Principal International Emerging Markets Fund R-5 = (PEPSX)
ProFunds Ultra Emerging Markets ProFund; Investor = (UUPIX)
Quantitative Emerging Markets Institutional Fund = (QEMAX)
RS Emerging Markets Fund K = (REMKX)
Schroeder Emerging Market Equity Fund; Investor = (SEMNX)
Schwab Fundamental Emerging Markets Index Fund = (SFENX)
SSGA Emerging Markets Fund = (SSEMX)
Swisscanto Ch Equity – Emerging Market = (SWCEMMK SW)
TCW Emerging Markets Equities Funds = (TGMIX)
Templeton Emerging Markets Small Cap Fund; A = (TEMMX)
T-Rowe Price Emerging Markets Stock Fund = (PRMSX)
Van Eck Emerging Markets Fund Stock; C = (EMRCX)
Virtus Emerging Markets Opportunities Fund I = (HIEMX)
Wasatch Emerging Markets Small Cap Fund = (WAEMX)
Wells Fargo Adventure Emerging Equity Fund B = (EMGBX)
APPENDIX C:
The following is a list of mutual funds used to measure excess return, information ratio and Jensen’s alpha:
Aberdeen Emerging Markets Fund A = (GEGAX)
Allianz Agic Emerging Markets Opportunities Fund A= (AOTAX)
American Beacon Emerging Markets Fund; Investor= (AAEPX)
Causeway Emerging Markets Institutional Fund= (CEMIX)
Columbia Emerging Markets Fund Z = (UMEMX)
Delaware Emerging Markets Institutional Fund= (DEMIX)
Dimensional Fund Advisors Value Portfolio= (DFEVX)
Driehaus Emerging Markets Growth Fund = (DREGX)
Dunham Emerging Markets Stock Fund = (DNEMX)
DWS Emerging Markets Equity Institutional Fund = (SEKIX)
Eaton Vance Parametric Structured Emerging Markets Fund A = (EAEMX)
Forward Emerging Markets Institutional Fund = (PTEMX)
GMO Emerging Markets Fund III (GMOEX)
Goldman Sachs Emerging Markets Institutional Fund (GEMIX)
Hansberger Emerging Market Fund – Advisor (HEMMX)
Harding Loevner Emerging Markets Portfolio
= (HLEMX) ING Emerging
Markets Countries Fund A = (NECAX)
Invesco Developing Markets Fund A = (GTDDX)
John Hancock Emerging Markets Value Fund = (JEVNX)
Laudus Mondrian Emerging Markets Institutional Fund = (LEMNX)
Lazard Developing Markets Equity Portfolio: Institutional = (LDMIX)
Legg Mason BatteryMarch Emerging Markets Trust I = (LGEMX)
Marshall Emerging Markets Equity – I = (MIEMX)
MFS Emerging Markets Equity - I = (MEMIX)
Oppenheimer Developing Markets Fund – Y = (ODVYX)
Pace International Emerging Markets Equity Investments – A = (PWEAX)
Principal International Emerging Markets Fund R-5 = (PEPSX)
ProFunds Ultra Emerging Markets ProFund; Investor = (UUPIX)
Quantitative Emerging Markets Institutional Fund = (QEMAX)
RS Emerging Markets Fund K = (REMKX)
Schroeder Emerging Market Equity Fund; Investor = (SEMNX)
Schwab Fundamental Emerging Markets Index Fund = (SFENX)
SSGA Emerging Markets Fund = (SSEMX)
Swisscanto Ch Equity – Emerging Market = (SWCEMMK SW)
TCW Emerging Markets Equities Funds = (TGMIX)
Templeton Emerging Markets Small Cap Fund; A = (TEMMX)
Transamerica WMC Emerging Markets; I2 = (TWMCX)
T-Rowe Price Emerging Markets Stock Fund = (PRMSX)
Van Eck Emerging Markets Fund Stock; C = (EMRCX)
Virtus Emerging Markets Opportunities Fund I =
(HIEMX) Wasatch Emerging Markets Small Cap Fund
= (WAEMX) Wells Fargo Adventure Emerging
Equity Fund B = (EMGBX)
APPENDIX D :
The following is a list of emerging market mutual funds that I used to determine whether Emerging Markets were undervalued or overvalued through price-multiple analysis:
Aberdeen Emerging Markets Fund A = (GEGAX)
Allianz Agic Emerging Markets Opportunities Fund A= (AOTAX)
American Beacon Emerging Markets Fund; Investor= (AAEPX)
Causeway Emerging Markets Institutional Fund= (CEMIX)
Columbia Emerging Markets Fund Z = (UMEMX)
Delaware Emerging Markets Institutional Fund= (DEMIX)
Dimensional Fund Advisors Value Portfolio= (DFEVX)
Driehaus Emerging Markets Growth Fund = (DREGX)
Dunham Emerging Markets Stock Fund = (DNEMX)
DWS Emerging Markets Equity Institutional Fund = (SEKIX)
Eaton Vance Parametric Structured Emerging Markets Fund A = (EAEMX)
Forward Emerging Markets Institutional Fund = (PTEMX)
GMO Emerging Markets Fund III (GMOEX)
Goldman Sachs Emerging Markets Institutional Fund (GEMIX)
Hansberger Emerging Market Fund – Advisor (HEMMX)
Harding Loevner Emerging Markets Portfolio
= (HLEMX) ING Emerging
Markets Countries Fund A = (NECAX)
Invesco Developing Markets Fund A = (GTDDX)
John Hancock Emerging Markets Value Fund = (JEVNX)
Laudus Mondrian Emerging Markets Institutional Fund = (LEMNX)
Lazard Developing Markets Equity Portfolio: Institutional = (LDMIX)
Legg Mason BatteryMarch Emerging Markets Trust I = (LGEMX)
MFS Emerging Markets Equity - I = (MEMIX)
Oppenheimer Developing Markets Fund – Y = (ODVYX)
Pace International Emerging Markets Equity Investments – A = (PWEAX)
Principal International Emerging Markets Fund R-5 = (PEPSX)
ProFunds Ultra Emerging Markets ProFund; Investor = (UUPIX)
Quantitative Emerging Markets Institutional Fund = (QEMAX)
RS Emerging Markets Fund K = (REMKX)
Schroeder Emerging Market Equity Fund; Investor = (SEMNX)
Schwab Fundamental Emerging Markets Index Fund = (SFENX)
SSGA Emerging Markets Fund = (SSEMX)
TCW Emerging Markets Equities Funds = (TGMIX)
Templeton Emerging Markets Small Cap Fund; A = (TEMMX)
Transamerica WMC Emerging Markets; I2 = (TWMCX)
T-Rowe Price Emerging Markets Stock Fund = (PRMSX)
Van Eck Emerging Markets Fund Stock; C =
(EMRCX) Van Guard Emerging Markets Stock Index
Research; Admiral (VEMAX) Virtus Emerging Markets
Opportunities Fund I = (HIEMX) Wasatch Emerging
Markets Small Cap Fund = (WAEMX)
Wells Fargo Adventure Emerging Equity Fund B = (EMGBX)
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