3 Points to set the Global Landscape
- Developed Europe has been a drag for investors who were chasing the performance from the end of 2013. It is the only region (MSCI Europe Index) with negative performance (-3.02%) over the last three months, and is highlighted by MSCI Austria which was down -11.49% in July.
- The MSCI Emerging Markets Index outperformed MSCI World Index (developed markets) by 3.53% in July. China and Indonesia led the region as both were up over 8%.
- Countries with the strongest fundamentals continued to outperform while buying countries with cheap valuations has been a drag on country selection.
2 Countries that are rising
South Korea (EWY)(FKO) Jumped 4 spots in the rankings and is now ranked #3 overall. South Korea already had top 5 risk and valuation rankings, but got a big boost with improving momentum. As of the end of July, the MSCI South Korea Index was up 6.53% over the last 3 months. In addition they are trading at a major discount with a 10.9 P/E compared to the MSCI ACWI Index at 17.3.
Brazil (EWZ)(FBZ)(DBBR) finally climbed in the rankings after an extended time near the bottom. They are currently ranked near the middle of our universe at 18th overall. They have had good momentum over the last 6 months, and are one of the few countries with positive returns this month. Brazil remains the riskiest country we follow, especially when considering their currency valuation. However, downside deviations are improving make it worth monitoring.
2 Countries that are falling
Italy (EWI) dropped 9 spots and is now ranked 30th overall. They are the 3rd worst performing country over the last 3 months, down -6.97% (MSCI Italy Index) in USD. Italy also has the worst fundamental profile of any country we follow. They have the lowest Return on Equity at a mere 3.2% compared to the ACWI of 11.9%. Valuations are also extremely rich. The MSCI Italy Index currently has a P/E of 32.2, 18.4 points higher than their average 5-Year P/E of 13.9.
Peru (EPU) continued to slide in the rankings and is now the second worst ranked country we follow. Valuations are at extreme absolute and relative levels. Price/Cash Earnings for the MSCI Peru Index is 33.3 while the MSCI ACWI is only 10.2. Additionally, they have the worst year-on-year trailing growth in EPS and a dividend yield of only 1.2%.
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