Heading into July, we think that the 4 countries listed below warrant extra focus. Our complete list of country rankings can be downloaded here.
3 Points to set the Global Landscape
- For the first time in over 20 years, the range of country returns in our model was under 10% from the best performing country to the worst. June’s spread was a mere 9.21% with the MSCI Thailand Index up 6.81% and the MSCI Turkey Index down -2.40%.
- Emerging markets are sustaining momentum. The MSCI EM Index finished the quarter up 6.60% while the MSCI EAFE Index was up 4.09% and the MSCI USA was up 5.05%.
- Countries with the strongest fundamentals are continuing to lead the market. India, China, South Africa, and the US all outperformed the ACWI last month and are in the top 5 of fundamentally ranked countries.
2 Countries that are rising
Norway (ENOR)(NORW) continued to rise in the rankings and is now our #1 overall ranked country. They are a top 5 country in both momentum and valuation. On a PE basis, Norway is the second cheapest country in developed Europe trading at 12.4 relative the MSCI Europe index of 17.6. For the quarter ending June 30th, Norway was the 3rd best performing country in the MSCI ACWI Index in local currency.
India (INDA)(INDY)(EPI)(PIN) is showing improving fundamentals, risk, and valuation, but showed the biggest jump coming from their momentum. Since the Modi election, India has been one of the hottest countries. They are the best performing country in the MSCI ACWI Index for the quarter and the year in local currency. In addition to great momentum, India has solid fundamentals. Their internal growth rate is nearly double the average country in the MSCI ACWI at 11.4% compared to the average country of 6.0%.
2 Countries that are falling
Indonesia (EIDO) had the largest drop in our newest rankings and is now ranked 14th overall. While they still have the best fundamental profile, increasing risk and decelerating momentum are bringing them down. On the risk side, CDS levels have been increasing rapidly. Over the last 3 months, CDS levels have increased by 1.3% while the average country in the MSCI ACWI has fallen by 7.0%.
France (EWQ) has continued to fall in the rankings and is currently ranking 27th overall. Fundamentals are deteriorating and momentum is slowing. France, which represents approximately 15% of the MSCI Europe Index, has an ROE of 7.6 while the MSCI Europe Index is 10.5. France is also showing decelerating OECD leading indicators and an internal growth rate of only 2.7%.
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